ttinwiinmiiiwimnwiil 


Kiliii 


liii 


m 

p|iilil|lp 


liii'ili'll'Si'llHiLlilUiJiiiU' 


iPi 

mm 

IIP 


SAN 


Y.  T.^^^imr'"- 


AMERICAN  BUSINESS  IN 
WORLD  MARKETS 
JAMES  T.  M.  MOORE 


AMERICAN  BUSINESS 
IN  WORLD  MARKETS 

OUR  OPPORTUNITIES  AND  OBLIGATIONS  IN 

SECURING    EXPORT    TRADE 
THE  PLANS  AND  PURPOSES  OF  OTHER  NATIONS 

By 
JAMES  T.  M.  MOORE 


SANTA    BARBARA.    CALIF. 


y  3^ 

StiidesiU  Library 


Santa  Barbarpt.  laiiiorisia 


NEW  XSJ^  YORK 
GEORGE  H.  DORAN  COMPANY 


«M»««s  ^m^m0>^''>**'**■ 


Copyright,  1919, 
By  George  H.  Doran  Compcmy 


1348i 


Printed  in  the  United  States  of  America 


CONTENTS 

PART  I 
AMERICA'S  NEW  ECONOMIC  STATUS 

HAPTBR  PAGB 

I    The  Business  Man's  Era 13 

The  Business  Man  Coming  into  His  Own — The  Politician's 
Influence  Wanes — Where  Power  Rightfully  Belongs — 
Ancient  Civilisations  Compare  Poorly  with  That  Which 
Business  Enterprise  Has  Brought — War  Inspired  Industry 
with  Disposition  to  Resist  Oppression — Its  Spirit  of 
Pacifism  Is  Gone. 

II    Shares  in  Winning  the  War 17 

The  War  Was  a  Commercial  One  at  Least  in  Its  Finish — 
World's  Greatest  Military  Power  Proved  to  Be  Industry — 
A  Foreign  Tribute  to  Share  of  American  Business  Men — 
Those  Who  Have  Proven  Title  to  Leadership — Rights  of 
Business  Will  Be  Asserted. 

III  Congress  op  Business  Men 20 

The  Gathering  at  Atlantic  City — How  Future  Congresses 
May  Be  Conducted — Things  to  Be  Taken  for  Granted — 
Action  and  Decision  on  Action  Their  Proper  Function — 
Those  Who  May  Participate — Workers  Also  Are  Indus- 
trialists— Others  Who  Merit  Title  of  "Honorary  Business 
Men." 

IV  The  Right  of  Combination 25 

Combination  Was  Essential  to  Victory — The  Handicap 
of  Restrictive  Laws — Advantages  and  Possible  Dangers  of 
Industrial  Union — Business  Men  Best  Qualified  to  Work 
Out  the  Solution — Union  Needed  to  Alleviate  Unemploy- 
ment— How  the  Creation  of  New  Industries  is  Promoted — 
Price  "Stabilisation." 

V   A  New  Ideal  of  Competition 3° 

Unnecessary  Waste  a  Gross  Injury  to  the  Country — The 
Enforced  Competition  that  Fostered  Disloyal  Trade 
Practices— War  Industries  Board  Showed  a  New  Way — 
Fair  to  Government  and  Fair  to  Industry — The  Legislation 
That  Is  To  Be  Desired. 

VI    Industrial  Lessons  of  the  War    ....  35 

Standardisation — Its  True  Meaning — A  Middle  Course 
Between  Extremes — How  Industry  May  Be  Benefited — 


vi  CONTENTS 

CRAPTBR  PAGE 

Danger  of  Preaching  Abstractions.  Business  Courage — 
Its  Absence  Helps  Wasteful  Competition — How  the 
Great  Industries  Showed  Up  Under  the  Test — The 
Courage  That  Is  Desirable — Conservation  in  Peace — 
War  Policies  Do  Not  Apply — Ill-Conceived  Conservation 
Would  Retard  Progress — Cost  Accounting — Lax  Methods 
Lead  to  Waste — A  Uniform  System  Is  Demanded. 

VII    Need  of  More  Power  in  Industry 46 

Why  the  American  Workman  Is  Unrivalled — More 
Power  at  His  Service — Importance  of  Developing  Water 
Power — Business  Congress  Adopts  Resolution — What 
a  British  Committee  Discovered — The  Best  Cure  for 
Low  Wages — Other  Nations  Alive  to  the  Need. 

VIII    Slanders  Against  American  Business      ....       54 

Tales  Spread  Abroad  About  "Commercial  Corruption" — 
A  Dr.  Jekyll  and  Mr.  Hyde  Idea — Responsibility  of  Our 
Own  Politicians  and  Organs  of  Publicity — A  Charge 
Made  by  Mr.  Gompers — Remedies  Needed  to  Re-estabilsh 
a  Right  Understanding. 

IX    Industrial  Relations 60 

Capital — Catch-words  That  Stigmatise  American  Busi- 
ness— Labor  the  Nursery  of  Capital — Their  Interests 
Undivided — Labor — The  American  Workingman  Refuses 
To  Be  Labelled — Appreciates  His  Rights  as  an  American — 
Representation  of  Labor — Participation  in  Industrial 
Administration — Error  of  Judging  from  Extremes — The 
La  Follette  Law — Where  Labor  May  Be  Brought  In — 
Welfare  Work  Improperly  Conceived — Minimum  Wage — 
111  Success  in  French  Cities — A  British  Plan — The 
"Minimum  Plus" — International  Proposals. 

X    Influences  Against  Bolshevism 75 

Germany's  Foul  Crime — A  Typical  Russian  Nihilist  Group 
— Wolfish  Leader  and  Following  of  Defectives — Organised 
for  Sabotage  in  Industry — Waves  of  Crime  That  Follow 
War — The  True  American  Workerilmmune — The  Remedy 
of  Publicity. 

XI    The  Doctrines  of  Americanism 82 

Scheme  of  Existence — America's  New  Relation  to  World 
Affairs — No  Longer  in  a  Charmed  World — We  Must 
Uphold  American  Principles — No  Standing  Still — Govern- 
ment Paternalism  as  an  Alternative — Control — The 
Democratic  Principle — The  Foundations — Who  Shall 
Conserve  the  Republic? — The  Politician's  Claim — That  of 
the  Industrialist — The  Control  That  Belongs  to  Labor — 
Responsibility — Power  Without  Responsibility — Need  of 
a  New  Rule — Where  Capital.  Labor  and  the  Community 
Have  Been  Delinquent — The  Case  of  the  Newspaper. 

XII    Statesmen's  Judgments 89 

Secretary  Lane's  Views  and  Prospects — Confidence  in  the 
American  People — The  Get-Together  Habit — Disposition 


CONTENTS  vii 


of  the  Administration  to  Co-operate  in  Solving  Business 
Problems — Commerce  Department  Plans — Statement  by 
Secretary  Redfield — Aid  for  Industry — Bureau  of 
Standards — Bureau  of  Foreign  and  Domestic  Commerce — 
Conservation  Division — Mr.  Lloyd  George  on  the  Changed 
Conditions — The  Rule  for  Success — Rights  of  Capital 
and  Labor — Both  Must  Receive  Increased  Recognition. 


PART  II 
THE  SCIENTIFIC  METHOD  IN  COMMERCE 

I    For  a  New  Moral  Code loi 

Men's  Sensibilities  Dulled  by  Revelations — German 
"Science"  of  Commercial  Expansion — Others  Have 
Studied  in  Same  School — Prospect  of  Germany  "Coming 
Back" — Her  Real  Purpose  in  Bringing  America  into  the 
War — German  Business  Men  to  Lead  Government — 
Frightf  ulness  in  Commerce — No  Sign  of  Change  of  Heart. 

II    Protection  OF  American  Trade 112 

Government  Apathetic  in  the  Past — American  Interests 
Attacked  With  Impunity — Business  Men  Must  Unite 
for  Their  Protection — Task  Involves  Work  Administration 
Cannot  Undertake — What  American  Trade  Faces  in  the 
Future — How   Germany   Stands   Industrially. 

III  Germany's  Peace  Plans  During  War     .      .     .     .     117 

Open  and  Underhand  Methods — Transition  Economy — 
Institutions  for  Industrial  Concentration — Raw  Materials 
and  Shipping — Foreign  Exchange — Germany's  Continued 
Power  in  Foreign  Countries — Organisation  Needed  to 
Meet  Organisation — German  Methods  Differ  in  Different 
Countries. 

IV  How  Countries  Were  Exploited 124 

Denmark's  Free  Port — Germans  Used  It  to  American 
Detriment — How  the  Dye  Combine  Imposed  Itself 
on  France — Italy  Still  in  Danger  of  German  Clutch — 
Turkey  and  Russia  Under  German  Economic  Domina- 
tion— Rights  Abroad  Which  American  Business  Has 
Now  Acquired  by  Actual  Purchase. 

V    The  German  Cartel 131 

The  Science  of  Industrial  Combination — The  Cartel 
Developed  by  Evolution — Government  Enters  as  Partner 
— Dumping  Carried  Out  with  All  the  Power  of  the  State — 
When  German  Locomotives  Were  Imposed  on  Italy  and 
France — Foreign  Imitations  of  American  Machinery — 
Agriculture  Also  Preyed  Upon. 

VI    The  "Chain"  Method  OF  Expansion 140 

Concentration  of  Industries  Facilitated  Expansion  Abroad 
— Germany    Controlled    Foreign   Enterprises   through   a 


viii  CONTENTS 

CHAPTER  PAGE 

Minority  Interest — Great  Corporations  Started  a  "Chain" 
Which  Constantly  Lengthened — How  Local  Owners  Were 
Ousted  from  Own  Properties — The  "Chain"  in  Italy, 
Spain,  France  and  Other  Countries. 

VII    Concealing  Economic  Strength 147 

The  Foreign  Visitor's  Experience  at  Krupps — Keep-Out 
Signs  Elaborately  Courteous — German  Industries  Under 
Careful  Watch — Difference  of  American  Methods — 
Development  of  Central  Europe  Carried  on  Quietly — 
Important   River   and   Canal   Works  and  Shipbuilding. 

VIII    Germany's  Banking  System 154 

Forced  Growth  of  German  Banking — Capital  Mobilised  to 
Catch  Up  with  Commercially  Older  Countries — Com- 
parison with  English,  French  and  American  Systems — 
How  the  Six  Great  Banks  Grew — Government  Representa- 
tives Made  Directors — Oil  Stock  Promotions  and  Bank 
Rivalries — The  Grossbanken  and  the  Great  Industrial 
Corporations. 

IX   German  Banks  Abroad 164 

Economic  Theory  of  the  Foreign  Bank — Characteristics  of 
the  German  Banks  Abroad — Value  of  State  Direction — 
Prestige  of  the  German  Great  Banks  Utilised — Banks 
Founded  with  the  Foreigner's  Money — Silent  Partnership 
Arrangement  with  American  Banking  Houses — Experi- 
ences of  American  Business  Men  Who  Dealt  with  Them — 
Even  Blackmail  Resorted  to — The  Banking  Web  Around 
the  World. 

X    The  Spy  System  IN  Trade 176 

Secret  Service  Methods  Systematically  Employed — 
Experience  of  an  American  Agent  in  Germany — The 
German  in  France  Possessed  of  Private  Trade  Details — 
Investigation  of  the  German  Practices — The  Military 
Commercial  Traveller — Demand  That  German  Ways  Be 
Mended. 

XI    Influencing  the  Press 184 

Court  Martial  Exposes  Gern?an  Ways  of  Press  Corrup- 
tion— German  Female  Spy  Marries  Pre-Selected  Italian 
Sailor — She  Handled  Newspapers — Publicity  Organisa- 
tion of  German  Corporations — Denounced  as  "Corruption 
Agency" — SociaHst  Internationale  Used  as  Intermediary. 

XII    To  Protect'American  Products 190 

The  Distinctives  of  Merchandise — Germans  Systematically 
Appropriated  Those  of  Other  Peoples — "Vienna"  Hand 
Bags  Made  in  Germany — No  Business  Too  Trivial  for 
Imitation — Incident  of  the  "American  Saints"  in  Mexico — 
United  States  Products  Particularly  Exposed  to 
Appropriation. 


CONTENTS  ix 

CHAPTER  PAGB 

XIII  Bribery  in  Trade  Promotion 196 

Mystery  of  American  Trade  Misfortunes  Abroad — 
Sabotage  a  Typically  German  Weapon — Italian  Premier 
Denounces  Bribery — When  Krupps  Were  Exposed — An 
Apology  for  Commercial  Immorality — How  Shimmelpfeng 
Credit  Agency  Obtained  Its  Famous  Lists — German 
Professors  as  Corrupters  in  Italy. 

XIV  How  TO  Keep  American  Industry  American     .     ,     207 

Revelations  of  Extent  of  German  Commercial  Domina- 
tion— Consideration  of  Measures  That  May  Prevent 
Repetition  in  Future — British  Plans  for  Protecting  Trade 
— German  Metals  Company  Controlled  World's  Markets — 
Incident  of  St.  Andrew's  Bay — For  a  Monroe  Doctrine 
of  Commerce. 

PART  III 
WORLD  PLANS  AND  FOREIGN  TRADE 
I    European  Outlook  on  the  New  Era 217 

Old  Individualistic  System  of  Trading  Has  Gone — 
Governments  Will  Participate  in  Industry  and  Trade — 
Self-Sufficiency  as  a  Political  Necessity — Control  of 
Materials — Protection  of  Key  Industries — General  Agree- 
ment Reached  at  Paris  Economic  Conference. 

II    Great  Britain 220 

Extensive  Plans  Already  Matured — Ministry  of  Recon- 
struction Has  Started  New  Era  Projects — Combination 
in  Banking  and  Industrial  Corporations — Report  of 
Committee  on  After- War  Policy — Government  Assistance 
to  Certain  Industries— British  Labor  Party  for  National- 
isation Scheme. 

III  France 230 

Reconstitution  of  Devastated  Territory  is  Chief  Concern 
— Labor  Disturbed  by  Syndicalist  Doctrines — Project 
of  National  Economic  Council — America  Regarded  as 
•*  Guardian  Angel " — Expectation  of  Co-operative  Service — 
The  Principal  Needs  of  France — Government  Proposes 
National  Federation  of  Employers. 

IV  Italy 240 

Restriction  of  Emigration — Intended  that  Italian  Workers 
Abroad  Shall  Be  Skilled— Industrial  Development  in 
Italy — Declaration  of  Rights  by  Business  Men — Industrial 
Association  Issues  Proclamation — Capital  Will  No  Longer 
Tolerate  Unequal  Conditions — Italy  an  Inviting  Foreign 
Market — Danger  of  German  Penetration  Again  Threatens. 

V   Germany 257 

Twofold  Function  of  Ministry  of  Economics — An  Export 
Trade  Organisation  Formed — Bureau  for  Re-establishing 


CONTENTS 


German  Prestige  and  Commerce  Abroad — New  Intensive 
Study  of  Foreign  Countries  with  View  to  Trade — Expected 
Nationalisation  of  Many  Industries — How  Germans  Expect 
to  Retrieve  Their  Losses. 

VI  Foreign  Trade  Service 261 

State  Department  Proposes  Consular  Increase — To 
Make  Service  Strictly  American — New  Economic  Experts — 
Better  Pay  for  Consuls — Overwhelming  Duties  Imposed  on 
Them — Foreign  and  Domestic  Commerce  Bureau  to 
Expand — Valuable  Services  Which  It  Renders — To 
Explore  Foreign  Areas. 

VII    America's  Representation  Abroad 269 

Demand  Abroad  for  Reform  of  Diplomacy — Bureaucratic 
Methods  to  Be  Modernised — Economic  Rather  Than 
Political  Representation  Desired — Proposed  Directive 
Council  at  Home — Specialists  to  Control  Its  Sub-Divisions 
— The  Tests  for  Foreign  Representatives. 

VIII    National  Publicity 274 

A  Form  of  Propaganda  Being  Widely  Adopted — Foreign 
Offices  Generally  Had  a  Publicity  Bureau — How  Austria 
Profited  by  Hers — German  Business  Men  Originated  New 
Scheme — Economic  and  Political  Publicity — Important 
That  Work  Hereafter  Be  Above-Board — Publicity  to 
Promote  Industrial  Peace. 

IX   America's  Need  for  Foreign  Trade 283 

Adventitious  War  Trade  Developed  Production  Capacity — 
Our  Normal  Market  Outgrown — New  Outlets  Needed — 
Latin  America  Generally  Counted  On — South  Africa  and 
Australia — America  Practically  Pledged  Not  to  Usurp 
Foreign  Trade  of  Allies. 

X    American  Ships  Available  for  Commerce     .     .     .     287 

Widely  Varying  Statements  Regarding  Tonnage — Erro- 
neous Impressions  Widespread — Mr.  Schwab's  Figures — 
Forecasts  Will  Not  Be  Realised — Our  Effective  Ocean- 
Going  Tonnage — How  World's  Shipping  Has  Deteriorated 
— Wear  and  Tear  of  War  and  Inferior  Construction — 
Falling  off  in  Construction. 

XI  Education  for  Foreign  Trade 294 

British  and  German  Methods  of  Approach — Democracy  in 
Commerce — An  American  Policy  Should  Be  Formulated — 
Training  Must  Begin  in  School — Foreign  Trade  Is  Estab- 
lished Slowly — Two  Years  to  Get  Results,  Five  to  Found 
Permanent  Market. 

XII    Our  New  Obligations  to  the  World 303 

Duties  That  Accompany  America's  Financial  and  Com- 
mercial Supremacy — Warnings  Against  One-Sided  Trading 
— America   Must   Supply  Food,  Materials  and   Credit — 


CONTENTS  xi 

cbaptbr  pacb 

Will  Be  Expected  to  Invest  In  Foreign  Securities — 
Problems  of  Relations  with  Other  Peoples — Business  Men 
the  Natural  Leaders  in  Difficult  Times. 

PART  IV 
AN  ALTERNATIVE  FOR  FOREIGN  TRADE 
I    Development-  of  the.  Home  Land    .  /    .     .     .     .     307 

A  Rare.  Opportunity  Offers — Replace  the  War  Urge  with 
a  Peace  Urge — Scheme  of  "Beautiful  America" — 
Problems  of  the  Hour  Would  Vanish — How  United  People 
Can  Work  for  General  Betterment — All  Humanity 
Would  in  This  Way  Be  Benefited. 

II    Prompt  Action  Needed 318 

Conditions  Now  Ripe  for  New  Great  Undertaking — 
American  Industries  Are  Pausing  Before  Fresh  Start — 
Home  Trade  Versus  Foreign  Trade — Financing  Needed 
in  Either  Case — Machinery  Manufacturers  Preparing! 
Campaign — The  Most  Desirable  Purpose  in  Planning 
Public  Works. 


PART  I 
AMERICA'S  NEW  ECONOMIC  STATUS 

CHAPTER  I 

THE  BUSINESS  MAN's  ERA 

The  Business  Man  Coming  into  His  Own — The  Politi- 
cian's Influence  Wanes — Where  Power  Rightfully  Be- 
longs— Ancient  Civilisations  Compare  Poorly  with 
That  Which  Business  Enterprise  Has  Brought — War 
Inspired  Industry  with  Disposition  to  Resist  Oppres- 
sion— Its  Spirit  of  Pacifism  Is  Gone. 

"The  Business  Man's  Era."  Will  this  be  the  title 
which  the  future  historian  will  place  over  the  new  chap- 
ter that  now  opens  in  the  story  of  the  peoples?  The 
most  striking  phenomenon  which  he  is  apt  to  consider 
in  the  period  on  which  we  are  entering  is  the  sudden 
ascendancy  of  the  industrialist  to  power.  The  war  start- 
led the  business  man  to  a  realisation  of  what  a  poor  job 
was  being  made  of  the  governing  of  empires,  kingdoms 
and  republics — quam  parva  sapientia  regitur  mundus! 
What  little  wisdom  was  being  shown  in  the  government 
of  the  world,  in  our  day  as  thousands  of  years  ago.  The 
world  had  not  advanced  much  in  the  matter  of  its  gov- 
ernment. War,  and  a  "commercial"  war  at  that,  was 
sprung  on  it  before  business  men  had  an  inkling  of  what 
was  going  on. 

13 


14  AMERICA  IN  WORLD  MARKETS 

With  the  coming  forward  of  the  business  man  the 
future  historian  will  have  observed  the  demagogue  on 
the  defensive,  the  politician  being  elbowed  off  the  stage. 
Stupendous  problems  were  brought  up  by  the  war  and  the 
politician  was  powerless  to  handle  them.  Only  men  of 
enterprise,  energy  and  decision  were  qualified  to  deal 
with  these  problems.  And  such  men  fortunately  were 
the  business  leaders.  Had  they  been  in  charge  there 
would  have  been  no  war.  If  the  politicians  had  remained 
in  charge  where  would  the  world  be  after  militarism  and 
Bolshevism  and  the  other  scourges  had  run  their  course  ? 

Business  men  have  been  showing  a  vague,  inchoate  con- 
sciousness of  their  own  real  strength,  which  gradually 
seems  to  be  developing  into  a  definite  conception  leading 
them  to  an  assertion  of  their  rightful  influence  in  the 
direction  of  the  Nation's  affairs.  Who,  they  may  ask 
themselves,  are  best  qualified  to  handle  the  great  ques- 
tions of  the  hour?  Who  should  have  the  chief  voice  in 
settling  contentious  matters  of  international  importance 
— the  working  form  of  the  League  of  Nations,  the  right 
to  the  development  of  sea  power,  and  others  that  may 
profoundly  affect  the  whole  future  welfare  of  the  coun- 
try? Which  is  best  equipped  to  instruct  and  educate 
the  people  on  subjects  of  vital  moment — the  politician, 
whose  chief  anxiety  is  to  follow  his  followers,  to  inter- 
pret "his  district,"  to  encourage  their  want  of  knowledge 
and  even  to  flatter  their  lack  of  patriotism,  rather  than 
to  lead,  or  the  business  man  who  by  the  very  force  of 
conditions  is  constantly  driving  onward,  ever  forward? 

Who,  more  than  the  business  men,  have  contributed  to 
the  well-being  of  the  greatest  number?  Who  else  have 
it  in  their  power  to  bring  about  the  Utopia,  to  make  life 
better  worth  living  for  the  whole  people — what  the  poli- 


THE  BUSINESS  MAN'S  ERA  16 

tician  promises,  but  has  it  not  in  his  power  to  perform — 
to  increase  the  prosperity  of  the  Nation,  to  impart  the 
most  vigorous  impulse  to  the  progress  of  civilisation  ? 

The  ancient  Athenians  had  temples  and  masterpieces 
of  sculpture  to  rejoice  their  aesthetic  eye,  a  system  of 
polity  to  satisfy  their  aspirations  for  freedom,  and  they 
may  have  thought  it  the  acme  of  mental  entertainment 
to  listen  under  the  porticos  to  disquisitions  on  metaphysics 
by  the  philosophers  and  the  sophists.  They  attained  a 
notable  degree  of  culture  which,  like  that  of  other  peoples 
of  the  past,  has  often  been  held  up  to  us  for  our  admira- 
tion and  in  disparagement  of  our  own  methods  and  pur- 
suits, of  our  own  civilisation. 

But  where  was  the  civilisation  of  these  ancients,  in  any 
true  sense  of  the  word,  if  their  dwelling  places  were  win- 
dowless  and  dark;  if  they  slept  on  the  ground  on  rugs;  if 
their  food  consisted  of  a  few  ill-cooked  viands;  if  the 
winter  wind  eddied  around  their  bare  legs  and  spiralled 
up  along  their  bodies  under  their  loose  woollen  shirts  and 
coarse  over-drapes?  The  world  undoubtedly  would  be 
poorer  without  the  almost  divine  morality  of  Socrates, 
without  the  Belvidere  Apollo  and  the  Laocoon,  without 
the  poetry  and  drama  and  oratory  of  Hellas.  But,  with 
all  that  the  ancients  have  left  us,  where  would  the  world 
be  to-day  without  the  spiritual  courage,  the  enterprise 
and  the  zeal  of  the  manufacturers  and  merchants  of  our 
modern  times,  without  the  true  business  spirit  that  devel- 
oped the  mariner's  compass,  that  discovered  America, 
that  invented  printing,  that  led  up  to  the  electrical  age  in 
which  we  live?  It  would  be  back  still  in  darkness  and 
semi-savagery,  for  men  are  cruel  and  heartless  when  the 
world  is  poor.  The  producers  and  doers  of  the  business 
world  have  been  the  true  heralds  of  civilisation.     They 


16  AMERICA  IN  WORLD  MARKETS 

are  the  benefactors,  for  it  is  they  who  have  led  us  into 
the  era  of  Hght  and  of  comfort. 

As  the  doers  in  one  realm  of  social  activity,  the  men 
of  business  had  not  thought  of  their  capacity  to  be  the 
doers  in  the  other  principal  fields.  The  war  opened  their 
eyes.  It  showed  them  that  not  only  politics  and  war- 
making  and  the  social  fabric  generally  are  fundamen- 
tally dependent  on  them,  but  that,  unless  they  themselves 
take  a  direct  hand  in  it,  there  cannot  be  success  in  mod- 
ern politics,  or  in  war,  or  in  keeping  any  great  phase  of 
human  activity  going. 

The  war  inspired  new  feelings,  including  an  increased 
spirit  of  courage,  a  disposition  to  fight,  to  smash  oppres- 
sion. Business  men  had  suffered  from  oppression — on 
the  part  of  the  self-appointed  statesman,  the  poli- 
tician and  the  demagogue,  who  for  selfish  reasons  had 
kept  the  fires  of  strife  and  contention  glowing,  and  at 
times  also,  they  complained,  on  the  part  of  others,  in- 
cluding occasionally  such  specialists  as  the  lawyer  and 
the  banker,  who  made  the  path  of  business  difficult. 
Too  many  were  assuming  the  right  to  dictate  to  it. 
Business  had  stood  for  being  browbeaten ;  it  had  become 
to  some  extent  affected  with  a  spirit  of  pacifism.  But 
oppression  will  no  longer  be  tolerated.  The  day  of  paci- 
fism is  gone  by  forever.  Business  men  hereafter  will 
stand  up  for  their  rights. 

And  so  our  future  historian,  as  he  contemplates  the 
new  chapter — the  chapters  on  the  rule  of  the  patriarch, 
of  the  despot,  of  the  monarch,  whether  Caesar,  king  or 
military  captain,  and  of  the  lawyer-politician  being  defi- 
nitely closed — may,  perhaps,  intimate  that  he  expects  it 
to  remain  open  indefinitely. 


CHAPTER  II 

SHARES  IN  WINNING  THE  WAR 

The  War  Was  a  Commercial  One  at  Least  in  Its  Finish 
— World's  Greatest  Military  Power  Proved  to  Be  In- 
dustry— A  Foreign  Tribute  to  Share  of  American 
Business  Men — Those  Who  Have  Proven  Title  to 
Leadership— Rights  of  Business  Will  Be  Asserted. 

It  has  often  been  stated  that  the  late  war  was  a  com- 
mercial war  in  its  origin.  It  certainly  was  a  commercial 
war  in  its  finish,  for  it  was  in  the  designing  room,  the 
laboratory  and  the  factory  that  it  was  won  more  than  in 
the  field.  In  other  words,  it  was  no  mere  war.  Some 
more  adequate  term  should  be  found  to  indicate  the 
colossal  struggle  of  nations  against  other  nations  in 
which  all  the  resources  of  men,  machines,  raw  materials, 
manufactured  products,  human  energy  of  every  kind 
were  assembled  and  exploited  with  demoniacal  energy. 
The  word  "war"  is  utterly  inadequate  to  represent  this 
conflict,  which  was  greater  than  we  now  realise  and 
which,  only  through  a  certain  vista  in  the  perspective  of 
the  past,  will  begin  to  be  adequately  appreciated  in  its 
overwhelming  magnitude. 

Germany  was  the  world's  greatest  military  power  by 
her  own  claim  and  by  the  concession  of  a  great  many 
outsiders;  but  that  greatest  military  power  did  not  win 
the  war.  As  a  matter  of  fact  Germany  was  not  the 
greatest  military  power.     The  greatest  military  power 

17 


18  AMERICA  IN  WORLD  MARKETS 

in  the  world  to-day  is  industry.  It  is  industrial  power 
carried  out  to  its  fullest  exploitation.  As  time  goes  on, 
business  men  will  gradually  come  to  realise  that  their 
share  in  the  winning  of  the  war  was  paramount.  A  for- 
eign statesman,  in  fact,  has  casually  paid  a  pointed  com- 
pliment in  the  matter  to  the  business  men  of  the  United 
States.  The  noted  Japanese  envoy.  Baron  Nobuaki  Ma- 
kino,  delegate  to  the  Peace  Conference,  passing  through 
New  York  in  January  of  this  year  on  his  way  to  France, 
referred,  in  a  statement  for  the  press,  to  "the  American 
leaders  of  industry,  trade  and  commerce,  who  have  per- 
haps done  more  than  armies  or  navies  to  win  the  war." 
The  graceful  remark  was  not  uttered  as  a  sententious  ex- 
pression of  opinion  but  as  a  casual  announcement  of  fact 
which  was  to  be  taken  for  granted.  And  this  is  the  way 
it  will  finally  come  to  be  taken  by  the  business  men  of  the 
United  States.  Gradually,  they  will  realise  that  in  the 
day  of  the  nation's  crisis  theirs  is  the  predominant  func- 
tion. Gradually,  also,  they  may  be  expected  to  claim  for 
themselves  the  elementary  rights  and  prerogatives  to 
which  such  an  exalted  position  in  the  community  entitles 
them.  These  probably  will  include  the  right  to  have  a 
say  in  the  administration  of  the  nation  corresponding  to 
their  status  in  it  and  the  right  to  refuse  to  have  their  vital 
interests,  their  industries  and  the  off-shoots  of  their  in- 
dustries regulated  in  any  high-handed  way  by  those  in  the 
community  whose  status,  when  measured  on  any  justifi- 
able basis,  is  lower  than  theirs. 

The  leaders  of  American  industry  and  commerce  will 
not,  of  course,  seek  to  have  the  national  administration 
vested  in  their  particular  class.  That  is  not  the  point. 
What  they  may  be  expected  to  do  is  to  claim  a  due  and 
equitable  share  in  the  direction  of  public  affairs  and  in 


SHARES  IN  WINNING  THE  WAR  19 

deciding  policies  that  refer  to  their  own  special  con- 
cerns. The  test  of  war  has  shown  that  to  them  must  be 
entrusted  the  direction  of  vital  interests  in  the  hour  of 
crisis,  and  it  would  be  absurd  to  expect  that  they  should 
yield  up  ail  control  of  them  the  moment  the  crisis  has 
passed. 

Leaders  in  business  are  leaders  by  proven  title.  Bitter 
feelings  have  stirred  the  business  world  on  account  of 
the  undue  domination  of  others,  and  allusion  has  often 
been  made  to  undeserved  control  in  many  respects  on  the 
part  of  politicians,  attorneys  and  office-holders.  Not, 
be  it  remembered,  that  it  is  the  sense  of  American  busi- 
ness that  those  who  fall  into  these  classifications  are  out- 
side of  American  business,  since,  as  a  matter  of  fact,  in 
cabinet  and  other  offices  are  men  of  distinguished  busi- 
ness ability  who  in  every  strict  sense  are  business 
men,  and  among  the  lawyers  and  the  bankers  the  same 
fact  is  verified.  But  the  intensity  of  the  feeling  that 
business  has  too  often  been  differentiated  against  and 
that  the  lawyer,  the  politician  and  the  banker  are  among 
those  who  too  often  have  made  the  path  of  industry  and 
commercial  development  unnecessarily  difficult,  can  be 
lessened  only  by  the  exalting  of  business  to  its  true  rank 
in  the  direction  of  the  national  affairs  of  the  community. 


CHAPTER  III 

CONGRESS  OF  BUSINESS  MEN 

The  Gathering  at  Atlantic  City — How  Future  Con- 
gresses May  Be  Conducted — Things  to  Be  Taken  for 
Granted — Action  and  Decision  on  Action  Their  Proper 
Function — Those  Who  May  Participate — Workers 
Also  Are  Industrialists — Others  Who  Merit  Title  of 
"Honorary  Business  Men." 

American  industries  took  a  notable  step  forward  in 
their  own  interest  in  191 8,  when  in  the  month  of  De- 
cember they  showed  they  could  act  as  an  organised  whole 
by  meeting  in  congress  at  Atlantic  City,  The  War  In- 
dustries Board  had  prepared  the  way  for  this  by  forcing 
American  manufacturers  to  get  together,  by  making  men, 
who  never  expected  to  do  so,  shake  hands  with  one  an- 
other and  sit  on  opposite  sides  of  the  same  table  and 
discuss  questions  vital  to  themselves  in  a  frank  and  open 
way. 

The  four  days  of  the  Atlantic  City  congress  were  con- 
sumed in  the  holding  of  fractional  meetings  to  discuss 
questions  affecting  individual  industries  and  groups  of 
industries,  and  general  meetings  to  listen  to  addresses  by 
selected  speakers  and  in  voting  on  the  resolutions  picked 
out  and  condensed  by  a  Clearance  Committee  from  the 
multitude  of  more  or  less  elaborate  resolutions  proposed 
by  the  groups. 

Perhaps  this  Congress  of  the  manufacturers'  and  mer- 

20 


CONGRESS  OF  BUSINESS  MEN  21 

chants'  side  of  industry  and  commerce  could  not  have 
been  got  together  if  its  programme  had  not  been  planned 
in  accordance  with  the  programme  more  or  less  generally 
established  for  conventions.  The  great  outstanding  ad- 
vantage of  the  congress  was  indicated  in  the  simple 
fact  that  it  had  actually  got  together.  A  further  advan- 
tage exists  in  the  fact  that  it  showed  a  way  for  utilising 
subsequent  congresses  of  the  kind  for  specific  action  that 
can  be  of  material  benefit  to  American  industry  and  com- 
merce united  as  a  whole. 

It  is  clear  that  the  next  time  that  American  business 
meets  in  congress,  the  fruitless  time-wasting  features  of 
the  average  convention  will  have  to  be  eliminated.  Indi- 
vidual industries  and  groups  of  industries  can  hold  their 
special  meetings  in  advance,  so  that  their  representatives 
may  reach  the  congress  ready  to  take  part  in  it  as  a  con- 
gress. 

There  is  much  also  that  must  be  taken  for  granted  in 
behalf  of  the  delegates  to  such  a  congress.  It  will  have 
to  be  taken  for  granted,  for  instance,  that  they  are  fa- 
miliar with  the  great  questions  of  the  day  and  the  prob- 
lems of  industry  and  commerce;  that  they  do  not  need 
to  be  lectured  to  at  great  length  on  ethical  topics;  that 
they  are  men  of  action  and  decision  and  that  if  they 
assemble  in  a  business  congress  they  expect  it  is  for  the 
taking  of  action  in  matters  affecting  business,  so  that 
every  meeting  of  the  congress  may  be  a  landmark  in  busi- 
ness progress.  The  presence  of  notable  personages  as 
speakers  undoubtedly  lends  prestige  to  a  gathering  and 
such  personages  are  to  be  presumed  to  have  with  them 
a  message  of  importance.  But,  as  the  time  for  such  a 
congress  is  necessarily  limited,  long  addresses  on  special 
subjects  could  be  distributed  in  advance,  instead  of  being 


2«  AMERICA  IN  WORLD  MARKETS 

read  to  the  congress,  and  the  messages  of  importance 
could  be  gathered  by  the  Clearance  Committee  and  made 
available  for  those  assembled  without  encroachment  on 
the  time  available  for  the  vital  and  essential  work  of 
the  congress. 

Resolutions,  even  though  more  or  less  anodyne,  and 
trimmed  and  pared  to  conform  to  all  views  and  to  get 
by  expeditiously,  probably  have  some  real  effect.  But 
the  purpose  of  a  congress  of  business  is  action  or  deci- 
sion on  action.  Action  in  the  interest  of  business  as  a 
whole;  not  the  mere  formulating  of  resolutions,  but  the 
taking  of  steps  to  follow  up  or  carry  out  resolutions; 
not  merely  the  deciding  on  plans,  but  the  execution  of 
them;  this  must  be  the  aim — to  turn  effectively  to  ac- 
count the  quite  extraordinary  advantage  of  being  able 
to  gather  American  industry  and  commerce  into  a  con- 
gress. 

Those  who  organised  the  Atlantic  City  Congress  have 
put  American  industry  under  a  debt  of  obligation  to 
them.  It  is  to  be  hoped  that  they  will  continue  the 
work  and  organise  other  congresses.  Perhaps  they  may 
find  it  possible  to  go  further  and  to  bring  into  a  single 
congress  all  the  essential  elements  of  our  business  life, 
all  who  are  industrialists,  the  workers  of  industry  and 
commerce  as  well  as  the  manufacturers,  merchants  and 
financiers. 

And  here  again  there  would  be  much  that  should  be 
taken  for  granted.  For  instance,  the  American  worker 
need  not  be  lectured  to,  any  more  than  the  manufac- 
turer. It  may  be  taken  for  granted  that  he  too  is  fa- 
miliar with  fundamental  questions  of  the  hour,  that  he 
has  been  keeping  pace  with  developments,  that  he  is 
ready  to  consider  action  and  that,  satisfied  with  the  fair- 


CONGRESS  OF  BUSINESS  MEN  «3 

ness  and  equity  of  the  plans  proposed,  he  will  lend  his 
efforts  to  promoting  the  benefit  of  American  business. 
Let  it  be  taken  for  granted  that  he  is  not  so  terribly  sen- 
sitive about  his  status  as  a  worker,  as  is  sometimes  imag- 
ined ;  that  it  can  even  be  alluded  to  without  his  sensibili- 
ties being  wounded.  He  will  be  open  to  conviction  that, 
as  a  matter  of  fact,  all  engaged  in  industry  have  the 
right  to  be  regarded  as  workers.  Were  this  not  the  case, 
there  might  be  the  expedient  of  putting  overalls  on  the 
whole  hierarchy  of  a  manufacturing  business,  on  the 
president  and  treasurer,  on  the  executive  force  and  on 
the  office  force,  as  well  as  on  the  men  at  the  machines. 
No  absurd  action,  however,  is  necessary,  but  only  com- 
mon sense  and  tact  and  frank  and  friendly  advances 
toward  him,  to  weld  the  worker  into  the  common  bond 
and  to  satisfy  him  that  the  intriguing  politician  is  no 
less  his  enemy  than  the  enemy  of  the  head  of  his  con- 
cern and  that  his  interests  are  the  interests  of  the  in- 
dustry as  a  single  entity. 

One  thing  more  that  may  be  taken  for  granted,  with- 
out further  explanations,  is  that  there  are  statesmen, 
lawyers,  officials,  bankers,  "professional  men"  of  many 
kinds  who  have  deserved  well  of  industry  and  commerce, 
who  consequently  merit  the  conferring  on  them  of  the 
title  of  "honorary  business  men,"  and  who  accordingly 
might  rightfully  take  their  seats  in  a  congress  of  busi- 
ness. 

It  is  a  reasonable  subject  of  reproach  that  men  rec- 
ognised as  business  leaders  have  of  late  been  dealing  all 
too  lavishly  in  hypothetic  optimism,  announcing  publicly 
that  prosperity  is  ours  in  permanence,  if  only  business 
men  will  co-operate,  if  capital  and  labor  will  get  to- 
gether, if  production  is  pushed,  if  foreign  markets  are 


Z4i  AMERICA  IN  WORLD  MARKETS 

taken  over,  if  the  wheels  are  kept  turning,  wages  kept 
high,  and  unemployment  abolished.  They  advance  no 
concrete  word  of  counsel  as  to  how  all  these  desirable 
ends  are  to  be  made  an  actuality.  The  congress  of  busi- 
ness can  well  take  up  the  practical  constructive  work 
involved  in  bringing  about  the  desirable  changes,  of  pro- 
jecting into  peace  times  some  of  the  war-time  policies 
and  achievements. 

We  have  been  told  of  late  through  responsible  organs 
of  publicity  that  the  country  is  "legislatively  bankrupt," 
that  it  has  a  "Congress  of  pigmies,"  that  "the  people  do 
not  rule  in  the  United  States  to-day,"  that  "a  people  who 
have  just  decided  the  destiny  of  the  world  now  find  them- 
selves without  the  capacity  to  set  their  own  house  in  or- 
der." If  this  is  so,  what  part  of  the  blame  falls  on  Ameri- 
can business  men?  Again  we  are  fortunate  in  having 
this  congress  of  business,  which  can  step  in,  as  an  organ- 
ised, or  at  least  an  organisable,  body,  and  take  up  the 
responsibilities  that  rightly  fall  on  business  men,  supply- 
ing deficiencies,  co-operating  in  and  supplementing  the 
work  of  the  Congress  of  the  Nation. 


CJIAPTER  IV 

THE  RIGHT  OF  COMBINATION 

Combination  Was  Essential  to  Victory — The  Handicap 
of  Restrictive  Laws — Advantages  and  Possible  Dan- 
gers of  Industrial  Union — Business  Men  Best  Quali- 
fied to  Work  Out  the  Solution — Union  Needed  to  Alle- 
viate Unemployment — How  the  Creation  of  New  In- 
dustries Is  Promoted — Price  "Stabilisation." 

Among  the  great  practical  gains  which  the  mobilisa- 
tion of  American  industries  during  the  war  has  effected 
is  the  lesson  which  it  has  taught  for  the  elimination  of 
wasteful  methods  and  practices  and  the  establishment 
of  American  industry  and  commerce  on  a  high  plane  of 
scientific  system.  The  wastefulness  of  competition,  as 
it  was  carried  on  in  this  country,  proved  to  be  appalling 
in  its  extent  and  in  its  injury  to  American  business  and 
to  the  welfare  of  the  American  people.  It  was  nobody's 
business,  however,  to  bother  about  it,  until  the  war  came 
and  made  it  everybody's  business.  The  first  and  most 
urgent  remedial  measure  was  to  bring  the  industrial  in- 
terests of  the  country  together. 

Union  and  combination  were  the  foundation  of  the 
great  success  achieved  by  American  industry  during  the 
war.  Sharply  before  the  eyes  of  all  who  had  cognisance 
of  what  was  being  accomplished,  was  sketched  the  irri- 
tating picture  of  the  evils  which  can  be  caused  by  reck- 
less and  sweeping  legislative  action  on  the  part  of  those 

25 


26  AMERICA  IN  WORLD  MARKETS 

who  are  without  accurate  or  intimate  knowledge  of  the 
inward  workings  of  business.  There  are  dangers,  as  every 
business  man  freely  admits,  from  unrestricted  power  of 
combination  in  industry,  as  unscrupulous  persons  may 
use  the  combination  for  the  purpose  of  restricting  pro- 
duction and  increasing  prices  and  thereby  working  in- 
jury to  the  whole  people.  But  to  meet  such  a  danger  by 
applying  the  wholesale  remedy  of  cutting  off  entirely  the 
right  of  combination  may  mean  a  far  worse  injury  in  the 
long  run  to  the  nation's  interests.  In  the  day  of  compe- 
tition which  we  are  entering  that  country  would  be  under 
a  grievous  handicap  which  retained  such  laws  as  have 
been  enacted  in  the  United  States,  prohibiting  the  right 
of  combination  in  industry  and  commerce,  American 
business  men  have  submitted  to  such  laws  with  more  or 
less  good  grace,  chiefly  because  they  have  been  intimi- 
dated from  using  their  inalienable  right  of  getting  to- 
gether and  determining  on  steps  for  their  own  interest 
and  protection. 

A  certain  measure  of  combination,  for  the  purposes  of 
co-operation  and  co-ordination,  is  an  imperative  need  of 
modern  business  for  the  best  interests  of  the  entire  com- 
munity. If  to  a  representative  body  of  American  busi- 
ness, instead  of  to  politicians  and  lawmakers  who  lack 
the  specific  technical  knowledge  which  the  case  requires, 
were  left  the  decision  on  the  measure  of  combination  and 
co-operation  in  industry  which  would  meet  the  need  and 
which  at  the  same  time  would  obviate  the  dangers  of  price 
fixing  and  restriction  of  production,  there  can  be  no  ques- 
tion but  a  satisfactory  solution  could  be  worked  out 
which  would  meet  all  the  requirements  of  justice  and 
equity. 

The  interference  with  the  development  of  American 


,THE  RIGHT  OF  COMBINATION  27 

industry  and  commerce  which  prohibitive  legislation 
against  the  right  of  combination  brought  about  was  not 
merely  of  a  direct  kind.  Abuses  and  vexations  of  a 
secondary  character  flowed  from  the  same  source,  and  the 
general  result  was  a  blighting  effect  on  American  in- 
dustry. Germany  w^as  forging  ahead  with  cartels  and 
scientifically  planned  systems  for  co-operation  and  co- 
ordination— the  principle  of  combination  being  in  certain 
industries  pushed  to  the  point  of  concentration,  enforced 
syndicalisation — while  American  industry  was  writhing 
in  bonds  woven  by  American  laws  or  by  extravagant  in- 
terpretation or  application  of  laws.  And  now  by  every 
indication  we  are  at  the  turning  of  the  road  with  regard 
to  the  right  of  combination  and  co-operation  in  industry. 
The  one  thing  long  needed  in  our  industrial  life,  the  get- 
together  habit,  has  been  made  an  actuality. 

The  war  showed  that  union  meant  more  work,  better 
plans  for  work,  better  methods  of  distributing  work. 
When  the  question  of  unemployment  is  so  serious,  it 
would  be  criminal  not  to  profit  by  the  lesson. 

If  the  creation  of  new  industries  is  a  vital  need,  let  it  be 
remembered  that  it  is  by  unity  and  co-operation  that  new 
industries  are  quickly  planned  and  created. 

The  necessities  of  war  caused  the  enforced  bringing 
together  of  industries.  The  necessities  of  peace  may  de- 
mand no  less. 

A  special  committee  of  the  Chamber  of  Commerce  of 
the  United  States  has  reported  a  proposal  for  the  modi- 
fication of  the  "Anti-Trust  Laws,"  so  that  the  uncer- 
tainties arising  from  the  existing  legislation  may  be 
dissipated,  and  for  the  formulation  of  "standards  of 
general  business  conduct."  For  this  purpose  it  has 
recommended  that  the  Federal  Trade  Commission,  with 


28  AMERICA  IN  WORLD  MARKETS 

membership  increased  from  five  to  nine,  be  constituted 
a  supervisory  body  to  administer  such  newly  established 
standards. 

There  is  a  tendency  to  avoid  the  word  "combination." 
The  right  of  getting  together  aimed  at  is  being  referred 
to  as  "co-operation"  or  "co-operative  agreements."  But 
the  demagogue  politician  deals  in  words.  "Co-operation," 
which  he  cannot  but  approve,  will,  if  it  suits  his  purpose, 
be  labelled  "combination,"  and  condemned.  "Combina- 
tion" is  a  fairly  adequate  word,  seemingly  the  best  under 
the  circumstances,  as  its  meaning  is  clear  and  business 
men  understand  it  as  getting  together  for  the  purpose  of 
co-operative  agreements  for  beneficent  economic  service. 
How  the  politician  interprets  it  should  not  really  mat- 
ter. 

As  a  nation  we  are  combining  with  foreign  nations. 
All  the  new  important  projects,  political,  administra- 
tive, commercial,  are  based  on  combination.  The  most 
practical  decisions  of  the  Peace  Conference  have  been 
evolved  in  the  economic  field.  Co-operative  economic 
agreements  are  the  solution  of  world  problems. 

The  British  import  restrictions  on  shoes  have  been 
modified  to  permit  "fair  competition"  between  British 
and  American  manufacturers.  Yet  in  America  co- 
operative economic  agreements  have  been  under  the  ban 
as  if  they  were  in  their  essence  immoral. 

The  action  of  the  Department  of  Commerce,  in  con- 
junction with  its  new  Industrial  Board,  in  promoting 
"price  stabiHsation"  by  producers  of  what  it  calls  "basic 
commodities,"  among  which  it  includes  steel,  building 
materials,  textiles  and  foods,  is  a  significant  projection  of 
"war  methods"  into  peace  times.     It  would  seem  to  be 


THE  RIGHT  OF  COMBINATION  29 

a  reasonable  inference  that  agreements  among  producers 
cannot  be  inherently  wrong  and  that,  under  the  pressure 
of  conditions  and  with  proper  supervision,  their  object 
may  even  be  a  measure  of  price  fixing. 


CHAPTER  V 

A  NEW  IDEAL  OF  COMPETITION 

Unnecessary  Waste  a  Gross  Injury  to  the  Country — 
The  Enforced  Competition  That  Fostered  Disloyal 
Trade  Practices — War  Industries  Board  Showed  a 
New  Way — Fair  to  Government  and  Fair  to  Indus- 
try— The  Legislation  That  Is  to  Be  Desired. 

When  the  representatives  of  American  business  met 
in  Congress  at  Atlantic  City  it  became  gradually  im- 
pressed on  their  consciousness  that  one  particular  note 
dominated  all  discussions,  and  that  was — loud  or  latent 
in  every  notable  speech  or  resolution — the  demand  for 
the  emancipation  of  American  industry  and  commerce. 
The  shackles  must  be  struck  from  business ;  the  throttling 
legislation  must  be  relaxed  or  abolished.  This  was  the 
substantial  motive  of  long  addresses  and  complicated 
proposals. 

The  chief  aspiration  of  American  business,  assembled 
for  the  first  time  in  a  great  representative  gathering, 
speaking  for  the  first  time  as  a  whole — speaking  in  a 
rather  subdued  tone,  it  is  true,  as  if  not  yet  conscious  of 
the  great  strength  it  had  acquired  through  acting  as  a 
whole — was  for  freedom.  Freedom  in  the  interest  of  the 
nation  as  well  as  in  its  own;  freedom  to  do  good,  not 
license  for  evil;  freedom,  but  under  every  reasonable  re- 
straint that  might  assure  its  use  for  upright  purposes. 

When  "restrictions  on  trade"  were  spoken  of,  and 

30 


A  NEW  IDEAL  OF  COMPETITION  31 

these  were  constantly  recurring  words,  the  demand  for 
freedom  was  implied.  In  negative  expression  there  was  a 
very  positive  concept.  Removal  of  the  restrictions  of 
trade  imposed  as  a  war-time  measure  was  considered  a 
matter  of  minor  emergency  compared  with  the  imper- 
ative need  proclaimed  for  the  ending  of  the  legislative 
restrictions  that  had  hampered  industry  in  America  for 
so  many  years.  These  restrictions  had  been  potent  for 
evil,  not  merely  as  fostering  wanton  waste  of  resources, 
but  also  as  opening  the  door  to  despicable  commercial 
practices  by  the  crafty  and  the  unscrupulous.  They  had 
led  to  unfair  competition — "disloyal"  competition  is  the 
term  the  French  use — one  of  the  most  disheartening  evils 
with  which  the  loyal  business  man  has  to  contend.  Leg- 
islation denied  him  the  right  to  reach  agreements  with 
his  fellow  business  men  to  combat  those  unfairly  profiting 
by  the  opportunities  which  the  legislation  made  possible. 
A  new  kind  of  competition  is  acclaimed  as  the  right  of 
American  business,  and  as  an  urgent  necessity  of  the 
whole  American  community  in  entering  a  new  economic 
era.  The  manufacturer  who  has  high  standards  to  up- 
hold, the  producer  who  teaches  the  public  the  merits  of 
honest  goods,  the  dealer  who,  in  his  spirit  of  self-respect 
and  in  his  instinct  for  good  merchandising,  handles  the 
standard  grade  wares,  have  too  long  been  subjected  to  un- 
fair and  unnecessary  burdens,  to  wasteful  losses,  to  the 
penalties  that  trickery  and  chicanery  have  been  able  to  im- 
pose. The  experiences  of  American  business  during  the 
war,  under  the  direction  of  the  War  Industries  Board, 
have  shown  that  these  losses  and  burdens,  far  from  being 
anything  like  "necessary  evils"  as  they  had  sometimes 
been  described  by  the  unthinking  or  the  interested  in  the 


Sie  AMERICA  IN  WORLD  MARKETS 

days  of  peace,  are  in  reality  a  detriment  to  the  best  in- 
terests of  the  country. 

"That  a  new  and  better  epoch  of  competition  will  be 
inaugurated  as  a  result  of  what  we  have  learned  through 
the  war,  there  is  hardly  any  reason  to  doubt,"  Mr.  D.  R. 
McLennan,  Chief  of  the  Non-War  Section  of  the  War 
Industries  Board,  said  to  me  on  this  subject.  "The 
Board  was  created  to  make  possible  the  successful  prose- 
cution of  the  war.  It  called  in  business.  It  ignored  the 
Sherman  law.  It  mobilised  the  industries;  it  made  them 
combine.  The  result  showed  to  what  an  enormous  ex- 
tent waste  could  be  curtailed,  how  tremendously  the  busi- 
ness interests  of  the  country  could  be  benefited. 

"The  industries  are  eager  to  do  permanently  for  them- 
selves in  peace  what  the  Government  did  for  them  in 
war.  They  are  looking  for  legislation  to  make  it  pos- 
sible for  them  to  combine  in  curtailing  waste,  to  combine 
in  the  public  interest.  They  will  not,  of  course,  seek  the 
right  to  combine  for  the  purpose  of  price  fixing.  Stand- 
ardisation and  efficiency  are  goals  towards  which  they 
aim,  not  a  standardisation  that  could  possibly  imply  any 
restriction  on  the  development  of  methods  of  production, 
but  such  standardisation  as  makes  for  the  abolition  of 
waste,  and  as  is  now  known  to  be  a  national  economic 
duty. 

"The  War  Industries  Board  has  shown  how  easy  it 
is  to  be  fair  to  the  industries  and  at  the  same  time  to  be 
'  fair  to  the  Government.  The  Board  was  commended  by 
both  sides.  Among  the  services  which  it  rendered  to  the 
Government  and  to  business,  through  the  centralisation 
of  industries,  were  the  lessons  it  pointed  out  and  em- 
phasised for  the  elimination  of  waste,  the  spirit  of  co- 
operation in  the  interest  of  industry  and  of  the  general 


A  NEW  IDEAL  OF  COMPETITION  33 

public,  better  relationships  among  manufacturers,  the  im- 
portance of  industry  organising  under  suitable  control, 
the  desirability  of  modernising  manufacturing  processes. 

"Manufacturers,  we  now  realise,  should  have  easy  ac- 
cess to  some  judicial  body  in  which  they  could  place  full 
confidence  and  which  would  be  in  a  position  to  inform 
them  authoritatively  regarding  their  rights  in  combining, 
in  reaching  agreements  and  in  taking  action  generally 
for  the  stabilising  of  their  industry." 

Other  men,  who  had  served  on  the  War  Industries 
Board  and  who  were  among  the  speakers  at  Atlantic  City, 
indicated  that  the  one  lesson  which  should  not  be  lost 
was  that  the  getting-together  of  the  industries,  their  col- 
laboration and  spirit  of  unity  were  essential  to  the  prog- 
ress of  the  nation's  commerce. 

"Whatever  else  the  war  experience  has  shown,"  said 
A.  W.  Shaw,  Chief  of  the  Conservation  Division  of  the 
War  Industries  Board,  "it  has  proved  the  ability  of  com- 
petitors to  co-operate  effectively  and  the  willingness  of 
the  country  to  have  them  co-operate  for  the  elimination  of 
wasteful  practices.  It  has  shown  that  such  co-operation  is 
good  for  the  country  and  good  for  business  too.  We 
have  had  two  not  altogether  satisfactory  kinds  of  busi- 
ness in  this  country — the  extreme  of  competition  on  one 
side  and  the  extreme  of  combination  on  the  other.  The 
first  is  wasteful  and  the  second  is  open  to  well-known 
abuses,  which  the  laws  have  tried  to  prevent. 

"If,  now,  you  get  a  kind  of  competition  from  which 
the  waste  has  been  eliminated  by  counsel  and  co-operation 
among  the  competitors,  have  you  not  a  more  effective  sys- 
tem than  either  of  the  extremes?  This  I  think  is  what 
our  war  experience  has  been  tending  toward.  I  do  not 
believe  that  co-operation  to  eliminate  waste  in  the  public 


34  AMERICA  IN  WORLD  MARKETS 

interest  violates  either  the  letter  or  the  spirit  of  the  Sher- 
man Law,  but  I  would  suggest  that  Congress  make  a 
clear  affirmation  to  that  effect." 

The  legislation  that  is  generally  looked  for  is  legisla- 
tion that  will  take  away  from  any  outside  agency  the 
merely  arbitrary  faculty  of  saying  to  the  business  man 
what  he  shall  do  and  what  he  shall  not  do.  The  busi- 
ness man  wants  to  be  let  alone  in  exercising  his  Ameri- 
can prerogatives  in  his  own  particular  sphere. 

With  such  a  unanimity  of  feeling  as  has  been  mani- 
fested among  those  who  can  speak  with  competence  it 
cannot  be  rash  to  forecast  that  the  new  competition,  with 
the  manufacturers  organised  forcounsel  and  co-operation, 
will  derive  from  a  form  of  combination  that  can  readily 
be  kept  within  the  bounds  of  legality  and  will  be  a  form 
of  competition  better  inspired  and  economically  whole- 
some and  sound. 


CHAPTER  VI 

INDUSTRIAL  LESSONS  OF  THE  WAR 

Standardisation — Its  True  Meaning — A  Middle  Course 
Between  Extremes — How  Industry  May  Be  Bene- 
fited— Danger  of  Preaching  Abstractions. 

Business  Courage — Its  Absence  Helps  Wasteful  Com- 
petition— How  the  Great  Industries  Showed  Up  Un- 
der Test — The  Courage  That  Is  Desirable. 

Conservation  in  Peace — War  Policies  Do  Not  Apply — 
Ill-Conceived  Conservation  Would  Retard  Progress. 

Cost  Accounting — Lax  Methods  Lead  to  Waste — A  Uni- 
form System  is  Demanded. 

Standardisation 

Of  the  lessons  for  industry  which  the  war  has  taught, 
one  has  to  do  with  standardisation,  a  word  now  in  consid- 
erable vogue  and  in  connection  with  which  some  strangely 
vague  and  indefinite  advice  is  often  tendered  to  the  busi- 
ness world.  The  War  Industries  Board,  in  the  course  of 
its  work  for  gaining  the  utmost  efficiency  of  production 
of  the  materials  requisite  for  waging  the  war,  insisted 
on  a  generous  measure  of  standardisation. 

Industry  gained  in  the  process.  The  agricultural  ma- 
chinery companies  freely  delcare  that  it  was  a  boon  for 
them  to  have  the  thousands  of  varieties  of  tillage  imple- 
ments they  were  manufacturing  cut  down  to  a  few  hun- 
dred.   Wagon  makers  were  able  to  drop  hundreds  of  un- 

35 


36  AMERICA  IN  WORLD  MARKETS 

necessary  varieties  of  parts.  The  war  vindicated  the 
principle  of  standardisation.  But  that  does  not  mean  that 
the  word  should  be  made  a  shibboleth  and  the  principle 
worked  to  death.  It  was  a  good  thing  in  so  far  as  it 
allowed  products  to  be  turned  out  on  an  economical  basis 
and  in  so  far  as  it  put  a  ban  on  the  making  of  varieties  of 
products  merely  for  the  sake  of  varieties.  In  this  sense 
it  should  be  upheld  and  the  changes  which  were  brought 
about  in  war  time  should  be  continued. 

It  has  been  estimated  that  where  in  an  industry  there 
were,  say,  200  styles  or  varieties,  forty  per  cent  of  them 
were  being  made  at  a  loss.  Elementary  common  sense 
teaches  that  at  least  those  forty  per  cent  ought  to  be  sup- 
pressed. On  the  other  hand,  to  go  too  far  with  standard- 
isation and  to  trim  down  styles  and  varieties  so  that 
nothing  was  left  but  the  bald  trunk  of  the  tree,  producing 
only  the  most  primitive  kind  of  products,  would  be  even 
a  worse  sin  than  multiplying  the  unprofitable  and  wholly 
unnecessary  varieties. 

Beneficent  standardisation  lies  in  between  two  ex- 
tremes. It  is  not  something  about  which  governmental 
authority  can  lay  down  laws  and  prescriptions.  It  is  not, 
in  fact,  a  matter  for  hard  and  fast  rules.  Common  sense 
is  the  only  guide,  and  each  industry  must  be  entrusted 
with  the  task  of  working  out  its  own  standardisation.  It 
is  not  a  case  where  advice  from  the  uninformed  outsider 
can  do  any  particular  good. 

It  need  hardly  be  added  that  standardisation  takes  no 
account  of  any  suggestion  for  fixing  or  limiting  the  man- 
ner of  turning  out  products.  To  imagine  that  there 
would  be  any  gain  in  determining  the  number  of  varie- 
ties in  a  given  industry,  as  well  as  the  precise  means  by 


INDUSTRIAL  LESSONS  OF  THE  WAR       37 

which  such  varieties  should  be  produced,  would  argue 
complete  ignorance  of  the  economics  of  industry.  It 
would  be  a  deathblow  to  progress. 

A  form  of  standardisation  is  eminently  desirable  in 
broad  lines  of  national  development,  but  it  should  always 
be  conceived  and  put  into  effect  on  the  principle  of  mak- 
ing the  widest  allowance  for  improvements  and  in- 
novations. The  day  will  probably  come  when  we  shall 
have  a  centralised  standardisation  body  controlling  and 
directing  subsidiary  standardisation  committees,  which 
compile  information  and  formulate  rules  and  suggestions 
for  the  guidance  of  individual  industries  and  spheres  of 
work.  Such  a  body,  co-relating  the  development  of  in- 
terdependent industries,  could  greatly  facilitate  national 
progress.  The  unnecessary  duplication  of  effort,  and  the 
waste  involved  in  work  on  projects  that  could  not  "fit 
in,"  would  be  avoided.  Industries  and  inventors  would 
have  available  to  them  a  knowledge  of  the  direction 
along  which  development  is  needed  and  of  the  projects 
that  are  practicable  and  worth  while. 

The  evils  that  standardisation  undertakes  to  remedy 
grew  out  of  wasteful  competition ;  the  benefits  of  stand- 
ardisation, in  a  somewhat  different  sense,  are  in  the  co- 
ordination of  industrial  effort. 

It  is  one  thing,  however,  to  urge  on  manufacturers 
a  specific  standardisation  which  they  understand,  and 
quite  another  thing  to  talk  standardisation  to  the  great 
body  of  the  public. 

There  is  a  fairly  general  impression  that,  as  a  result 
of  war  exaltation,  we,  as  a  people,  are  now  in  a  sacrificial 
mood.  Prohibition  is  pointed  to,  as  the  instance,  and 
some  preaching  economists  are  urging  standardisation, 
as  well  as  thrift  and  other  "universals."    But  they  should 


88  AMERICA  IN  WORLD  MARKETS 

realise  that  standardisation  as  a  general  doctrine  can  be 
actually  dangerous  and  baneful,  that  a  wholesale  re- 
duction of  varieties  may  mean  less  goods,  less  turn-over, 
smaller  production,  fewer  wheels  turning;  less  employ- 
ment, lower  wages,  cheaper  and  worse  living  conditions 
for  a  great  part  of  the  community. 

One  of  the  drags  on  industry  and  commerce,  a  mill- 
stone around  the  neck  of  progress,  has  been  this  very 
standardisation;  to  the  thinker  it  recalls  the  fact  that 
civilisation  is  still  hampered  by  lack  of  vision  and  imagi- 
nation and  by  timidity  in  enterprise.  At  the  call  for 
standardisation  we  could  give  up  the  luxuries,  the  im- 
provements and  the  refinements  of  our  modern  life  and 
go  back  to  the  bald  necessities.  The  gain,  it  appears, 
would  be  that  thus  we  should  save ;  we  should  have  money 
in  our  pockets.  But,  after  all,  what  is  money  for?  If 
we  keep  it  in  our  pockets  we  are  merely  depriving  our- 
selves of  some  of  the  satisfactions — none  too  numerous 
at  best — of  our  brief  and  precarious  chance  at  life. 

Standardisation  in  its  essence  is  retrogressive.  It 
means  dropping  things,  going  back.  The  puritans  fas- 
tened a  good  deal  of  it  on  the  race.  We  have  long  been 
standardised  as  to  hats,  clothes,  shoes  and  in  our  mode  o£ 
living  generally.  There  are  varieties,  of  course,  but  this 
is  a  case  for  the  French  saying  to  the  effect  that  the  more 
variety  there  is  the  more  we  still  have  the  same  thing. 
Hundreds  of  millions  of  human  beings  have  been  submit- 
ting passively  for  generations  to  the  dictation  of  dead 
men  who  in  their  lifetime  were  certainly  not  distinguished 
for  liberality  of  mind  or  for  the  spirit  of  ambition  and  in- 
itiative that  makes  for  human  progress. 

In  the  new  era  business  men  might  well  give  less  heed 
to  the  altogether  too  many  "don'ts"  and  negative  retard- 


INDUSTRIAL  LESSONS  OF  THE  WAR      39 

ing  counsels  that  are  so  freely  showered  on  them,  and  on 
the  contrary  should  be  inspired  with  a  fresh  enthusiasm, 
with  the  desire  of  new  things,  reruni  novarum,  in 
Caesar's  phrase  for  "revolution."  The  revolutionary  im- 
pulse for  "new  things"  would  indeed  be  a  most  desirable 
counter-agent  for  the  kind  of  standardisation  that  has 
held  the  world  back,  and  it  would  be  an  incentive  to  rapid 
progress  and  a  stimulus  to  business  and  to  better  condi- 
tions. 

And  so  it  would  be  well  for  business  not  to  be  too  easily 
tolerant  of  the  abstractions  and  generalities — to  be  ready 
to  point  out  that  standardisation  is  not  per  se  a  good 
thing,  any  more  than  is  thrift  or  other  vague  and  un- 
qualified concepts — lest  a  whole  people,  in  more  or  less 
sacrificial  mood,  may  be  led  to  translate  them  into  action 
in  ways  that  may,  not  merely  hinder  progress,  but  have 
the  effect  of  setting  us  back  economically  in  serious  and 
regrettable  fashion. 

Business  Courage 

One  of  the  prime  causes  of  wasteful  competition  was 
a  lack  of  courage  on  the  part  of  the  producer.  Another 
cause  was  a  want  of  proper  business  methods,  of  a  cor- 
rect cost  system,  of  scientific  forms  of  accounting.  In 
the  race  for  business,  the  manufacturer  was  ready  to  do 
anything  rather  than  let  an  order  escape  him.  He  had 
not  the  nerve  to  say.  No.  He  met  his  competitor's  prices ; 
he  poured  out  samples;  he  multiplied  styles.  One  abuse 
followed  another.  Part  of  his  business  was  profitable; 
part  of  it  was  run  at  a  loss.  He  had  not  the  courage  to 
put  the  axe  to  the  latter  part.  Often  he  did  not  realise  it 
was  a  loss.    As  long  as  he  was  doing  business,  as  long  as 


40  AMERICA  IN  WORLD  MARKETS 

he  was  making  profits,  he  gave  the  matter  no  special  at- 
tention. As  long  as  the  public  paid  and  stood  for  it,  he 
had  not  cared. 

We  have  not  realised  that  by  waste  and  uneconomical 
methods  we  have  made  prices  increase;  we  have  done 
the  public  a  wrong.  If  we  produced  more  economically, 
we  should  sell  more  goods  and  people  would  live  better. 

Certain  kinds  of  economies  which  we  put  into  effect  in 
the  war-time  search  for  materials  should  most  assuredly 
be  continued.  It  was  found,  for  instance,  that  through 
the  prodigal  distribution  of  large  samples,  there  was 
wasted  in  this  way  an  average  of  nearly  a  whole  yard  of 
cloth  for  every  suit  made.  It  takes  about  three  and  one- 
quarter  yards  of  cloth  to  make  a  suit.  The  saving  made 
by  going  back  to  small  samples  of  cloth  means  material 
for  a  million  more  suits  of  clothes  a  year.  It  was  found 
that  the  business  world  was  full  of  just  such  practices 
that  were  sheer  waste.  Nobody  is  harmed  by  cutting 
down  the  size  of  cloth  samples  or  by  the  elimination  of 
other  unnecessary  waste.  The  whole  community  is  bene- 
fited by  it.  And  remember  that  it  was  not  through  the 
War  Industries  Board  or  any  other  Governmental  agency 
that  this  war-time  reform  was  effected.  It  was  through 
the  manufacturers  themselves.  The  Board  called  in  the 
industries  and  asked  how  they  could  be  put  on  the  most 
economical  basis  to  aid  in  the  successful  prosecution  of 
the  war.  The  industries  told  how  it  could  be  done  and 
then  the  Board  issued  orders  embodying  the  reforms  sug- 
gested and  these  orders  were  mandatory.  Two  hundred 
and  fifty  great  industries  were  involved. 

The  great  industries  of  the  country  showed  up  well 
under  the  searchlight  which  the  Government's  war  or- 
ganisations were  able  to  turn  on  them,  surprisingly  well 


INDUSTRIAL  LESSONS  OF  THE  WAR       41 

to  the  satisfaction  of  those  who  were  famiUar  with  the 
charges  made  against  the  big  inciustries,  of  stifling  com- 
petition, of  repressing  initiative,  of  frowning  on  new 
things,  of  shelving  great  inventions,  of  standardising  to 
the  point  of  keeping  the  industry  unprogressive  and  sev- 
eral laps  behind  similar  industries  in  other  countries. 
Any  one  acquainted  with  the  standing  among  the  nations 
of  American  industry  and  its  unrivalled  reputation  for 
keen  initiative  and  untiring  progressiveness  must  know 
that  rash  accusations  of  this  kind  did  not  deserve  much 
consideration,  and  under  the  test  it  was  seen  that  there 
was  very  little  foundation  for  them.  There  was  a  notable 
degree  of  healthy  standardisation  in  most  of  the  great 
unified  businesses,  and  at  the  same  time  a  policy  of  active 
encouragement,  of  evolutionary  development,  and  a  con- 
stant reaching  out  for  the  newest  and  the  best. 

The  war  rendered  a  distinct  service  in  reviving  busi- 
ness courage,  an  asset  of  enormous  value  to  industry.  A 
collective  examination  of  conscience  might  reveal  many 
ways  in  which  business  men  have  sinned  through  the  vice 
of  pusillanimity.  In  the  coming  days  the  business  man 
who  cannot  goad  his  soul  to  vigorous  emanations  may 
entertain  some  just  apprehensions,  for  the  prospect  is 
that  wobbling  and  indecision  will  be  peculiarly  dangerous 
and  that  courage,  calm  and  serene,  will  be  in  demand. 

Industry,  we  are  told,  is  on  the  eve  of  a  great  change. 
If  the  predictions  of  all  those  who  have  been  warning 
us  about  it  were  realised,  it  would  not  be  a  gradual, 
natural  and  desirable  change,  but  a  bursting  of  dams,  a 
sort  of  cataclysm.  The  manufacturer  who,  when  con- 
templating such  a  possibility,  was  conscious  in  his 
thoughts  that  he  succumbed  to  the  flood,  who  showed 
no  fight,  who  put  up  no  struggle  in  his  own  behalf  and 


42  AMERICA  IN  WORLD  MARKETS 

in  that  of  his  country,  who  failed  in  self-assertion  and 
did  not  keep  repeating  that  he  was  the  master  of  his 
fate,  the  captain  of  his  soul,  might  safely  consider  him- 
self predestined  for  disaster  if  the  dams  ever  did  break. 
The  prophets  of  evil  may  be  all  wrong — probably  they 
are — but  the  possibility  of  trying  days  to  come  ought  to 
spur  business  men  to  whet  their  courage. 

Conservation  in  War  and  Peace 

War-time  conservation  of  course  was  quite  a  different 
matter  from  conservation  in  time  of  peace.  The  former 
was  strictly  a  war  measure,  and  economies  were  made 
obligatory  for  one  sole  purpose,  the  winning  of  the  war. 
The  policies  that  determine  conservation  in  peace  can- 
not therefore  be  based  on  the  war  conditions.  Thus,  for 
example,  while  the  Conservation  Division  of  the  War 
Industries  Board  was  successful,  by  getting  together 
with  the  authorities  in  Paris  and  with  leading  dress- 
makers in  America,  in  bringing  into  vogue  a  narrow 
skirt  for  women,  with  a  hem  measurement  of  only  about 
a  yard  and  a  half,  while  the  trend  of  fashion  at  the 
moment  was  towards  a  skirt  nearly  twice  as  wide,  it  does 
not  follow  that  economy  of  that  kind  should  desirably 
be  made  permanent. 

Conservation  and  economy,  ill  conceived,  might  be  a 
serious  danger  to  business  development  and  to  prosperity. 
We  could  limit  our  needs,  we  could  live  frugally,  we  could 
dress  in  shoddy,  w^e  could  walk  instead  of  ride;  but  that 
would  be  going  back,  instead  of  forward  in  civilisation. 
It  is  important  that  the  whole  people  grasp  accurately 
the  fact  that  there  are  extremes  in  economics  which  must 
carefully  be  avoided. 


INDUSTRIAL  LESSONS  OF  THE  WAR      43 

Cost  Accounting 

As  already  stated,  a  cause  of  continued  wasteful  com- 
petition among  manufacturing  concerns  is  the  lack  of 
proper  business  methods  in  keeping  accounts. 

If  the  manufacturer  knew  exactly,  in  hundreds,  tens 
and  units  of  dollars,  what  a  given  volume  of  his  pro- 
duction stood  him  at  a  particular  time,  he  would  be  far 
less  likely  to  squander  it  in  a  competitive  fight.  Where 
he  gazed  at  it,  not  as  so  much  merchandise  which  he  was 
letting  go  at  a  price  which  might  or  might  not  allow  him 
to  break  even,  or  perhaps  to  make  some  profit,  but  in  the 
form  of  dollars  and  cents  which,  when  compared  with 
the  dollars  and  cents  he  was  to  receive  in  his  sacrifice 
sale,  showed  positive  loss,  he  might  reform  his  methods. 

The  successful  business  man  does  not  throw  away  hard 
cash.  Usually  he  would  as  soon  take  physical  punish- 
ment as  be  mortified  by  being  confronted  with  figures 
that  showed  he  was  engaged  in  making  ropes  of  sand, 
going  through  a  farcical  performance  of  purchasing, 
carrying  and  warehousing  raw  materials,  subjecting  them 
to  a  costly  process  of  manufacture  and  selling  them 
approximately  at  the  price  they  stood  him.  A  profes- 
sional expert  going  through  the  mummery  of  his  profes- 
sion, but  overlooking  the  one  vital  purpose  for  which  he 
was  engaged  in  that  profession !  Those  who  held  up  for 
his  consideration  the  figures  that  revealed  the  inanity  of 
his  undertaking  could  well  deride  him,  and  he  must  hang 
his  head  in  confusion. 

Sometimes  a  manufacturer  of  this  class  will  attempt  a 
rejoinder.  "When  I  let  my  wares  go  in  this  way  without 
a  profit,"  he  will  say,  "I  consider  it  an  investment  in  ad- 
vertising."   But  by  a  remark  of  that  kind  he  is  only  con- 


44  AMERICA  IN  WORLD  MARKETS 

founding  himself  still  more  profoundly.  For  the  adver- 
tising expert  will  show  him  with  inexorable  logic  that  he 
is  merely  abusing  words,  that  the  "advertising"  he  is  thus 
taking  to  himself  is  the  kind  that  will  make  him  notorious 
and  not  famous,  that  he  is  advertising  himself  out  of  busi- 
ness instead  of  assuring  to  himself  the  rock  bottom  foun- 
dation of  permanency. 

The  expert  accountant  will  show  such  a  citizen  that  he 
is  perhaps  not  making  proper  distribution  of  his  indirect 
expenses,  or  that  he  is  taking  no  account  of  economic  ex- 
penses or  of  outlay  under  other  heads,  or  that  he  is  figur- 
ing percentage  costs  and  percentage  profit  on  the  wrong 
end  of  the  transaction,  or  committing  some  other  accoun- 
tancy blunder.  A  proper  system  of  cost  accounting 
would  be  the  red  flag  warning  him  of  impending  danger. 

It  is,  of  course,  an  invidious  task  to  assume  to  tell  the 
manufacturer  how  to  conduct  his  business.  He  may  quite 
naturally  retort  that  he  himself  knows  his  own  business 
best;  that  if  he  does  the  uneconomical  things,  it  is  be- 
cause he  is  forced  to  it  by  the  special  conditions.  And  yet 
it  is  imperative  that  it  be  impressed  on  him  that  the  waste 
must  be  compensated  for  somewhere — in  loss  of  profit; 
in  higher  prices;  in  lower  wages;  in  inferior  goods;  in 
general  injustice  to  the  public. 

A  resolution  passed  by  one  of  the  major  groups  at  the 
congress  of  business  men  at  Atlantic  City  declared,  in 
its  preamble,  that  "a  proper  cost  accounting  system  is 
the  only  safe  basis  for  the  conduct  of  any  business  and 
the  only  efifective  restraint  for  ignorantly  destructive 
competition."  It  called  upon  the  Federal  Trade  Commis- 
sion to  "take  such  steps  as  may  be  necessary  to  insure  the 
adoption  by  manufacturers  of  satisfactory  cost  account- 
ing methods." 


INDUSTRIAL  LESSONS  OF  THE  WAR       45 

The  equitable  distribution  of  tax  burdens  is  another 
imperative  reason  for  seeking  the  establishment  of  uni- 
form systems  of  accounting  among  manufacturers.  In- 
deed, suggestions  have  emanated  from  the  Federal  Trade 
Commission  regarding  the  desirability  of  legislation  to 
impose  on  American  business  a  uniform  system  of  cost 
accounting. 


CHAPTER  VII 

NEED  OF  MORE  POWER  IN  INDUSTRY 

Why  the  American  Workman  Is  Unrivalled— More 
Power  at  His  Service — Importance  of  Developing 
Water  Power — Business  Congress  Adopts  Resolution 

What  a  British  Committee  Discovered — The  Best 

Cure  for  Low  Wages— Other  Nations  Alive  to  the 
Need. 

A  REALISATION  of  the  tremcndous  importance  of 
abundant  power  for  industry  has  been  brought  home  to 
all  the  nations  by  the  war.  Failure  to  give  due  apprecia- 
tion to  this  subject  was  chargeable  not  merely  to  the 
general  public  and  to  the  politicians;  the  leaders  in  in- 
dustry had  not  always  shown  themselves  alive  to  its 
importance  and  economists  as  a  whole  had  strangely  over- 
looked it. 

We  heard  speculations  regarding  the  day  when  the 
world's  stock  of  coal  would  be  exhausted,  and  those  who 
did  the  speculating  indulged  in  reassurances  to  the  effect 
that,  after  the  coal,  we  should  have  other  sources  of 
power  supply,  oil  and  the  rays  of  the  sun,  and  the  ma- 
terials which  the  wizards  of  chemistry  would  put  at  our 
disposal,  of  which  elements  with  mysterious  endowments, 
like  radium  and  helium,  were  the  augury. 

It  is  odd  that  the  vital  fact  that  power  in  ever-increas- 
ing accumulation,  power  doubled,  trebled  and  multiplied, 
power  obtained  easily  and  cheaply,  is  one  of  the  prime 

46 


NEED  OF  MORE  POWER  IN  INDUSTRY     47 

essentials  of  great  industrial  development,  was  not 
grasped  or  at  least  was  not  emphasised.  People  talked 
of  "sufficient  supplies,"  of  "enough,"  when  we  should 
have  been  out  seeking  the  superabundance.  And  so  we 
went  on  using  coal  as  our  chief  source  of  power,  obtain- 
ing it  with  struggle  and  hardship,  and  often  wasting  vast 
quantities  of  energy  in  the  mere  handling,  hauling  and 
shunting  of  this  source  of  power  to  the  place  where  its 
energy  was  to  be  utilised,  penalising  industry  by  making 
it  bear  a  huge  burden  which  keen  foresight  and  good 
economics  might  have  spared  it. 

Now,  after  the  war  has  forced  the  nations  to  simple 
and  accurate  thinking  on  business  questions,  we  know 
that  it  is  urgent  to  provide  for  vast  resources  of  power 
and  to  do  so  with  a  minimum  of  labor  and  expense,  and 
with  all  possible  expedition.  A  striking  concrete  lesson 
has  recently  come  to  us. 

We  have  long  been  conscious  that  the  efficiency  of  the 
American  working  man  was  notably  superior  to  that  of 
the  worker  in  any  other  country.  Results  achieved 
proved  it  beyond  question.  The  causes  to  which  we 
ascribed  this  phenomenon  were  many  and  varied,  but 
always  illumined  by  our  sense  of  patriotism.  Recently  it 
has  been  brought  to  our  notice  that  the  precise,  the  scien- 
tific reason  why  the  American  working  man  excels  all 
others  is  because  he  has  at  his  service  fifty-six  per  cent 
more  power  than  the  working  men  in  any  other  country 
in  the  world.  In  the  countries  where  this  fact  is  now 
understood,  in  England,  France  and  Italy,  the  authorities 
are  already  engaged  on  the  task  of  increasing  the  national 
provision  of  power  at  a  vast  rate. 

In  America  a  campaign  of  education  to  make  known 
to  manufacturers,  to  legislators,  to  business  men  and  the 


48  AMERICA  IN  WORLD  MARKETS 

public  generally  the  need  of  putting  forth  efforts  to  en- 
dow the  country  with  greater  provision  of  power  was 
undertaken  more  than  a  year  ago.  It  brought  important 
results,  although  it  was  conducted  within  rather  narrow 
limits. 

.  The  source  from  which  it  is  proposed  to  draw  the 
vastly  increased  energy  for  industrial  purposes  is,  it 
need  hardly  be  added,  water  power,  which  abounds 
throughout  this  country.  There  is  hardly  a  zone  in  the 
United  States  that  is  not  directly  interested  in  such  a 
project,  and  it  is  one  which  in  some  measure  concerns 
every  single  inhabitant.  The  mere  modernising  of  the 
existing  water-power  plants,  the  installation  of  new  and 
better  machinery,  would  mean,  it  is  authoritatively  as- 
serted, an  increase  of  at  least  450»ooo  horsepower,  an 
annual  saving  of  several  million  tons  of  coal. 

More  power  implies  greater  facility  in  production, 
more  opportunities  of  errtployment  for  those  less  endowed 
with  physical  strength — a  desideratum  that  the  war  has 
emphasised — and  more  products. 

As  a  result  of  action  by  the  War  Conference  of  Busi- 
ness in  191 7,  a  referendum  vote  was  taken  among  the  or- 
ganisation members  of  the  Chamber  of  Commerce  of  the 
United  States  on  the  question  of  seeking  the  immediate 
enactment  of  Federal  legislation  on  water  power.  The 
vote  in  favor  was  1,333,  with  only  six  nominally  unfa- 
vorable. Later  on  the  Sims  bill  was  passed  in  the  House, 
and  the  Shields  bill  in  the  Senate  in  Washington,  both 
bills  embodying  substantially  all  the  basic  principles  of 
the  referendum  reports  and  entrusting  to  a  Federal  Com- 
mission water-power  jurisdiction  with  regard  to  public 
lands  and  navigable  streams.   More  than  half  the  unde- 


NEED  OF  MORE  POWER  IN  INDUSTRY     49 

veloped  hydraulic  horsepower  of  the  country  is  on  public 
lands. 

Mr.  Franklin  K.  Lane,  Secretary  of  the  Interior,  has 
asked  from  Congress  an  appropriation  of  $200,000  to  de- 
fray the  expense  of  an  investigation  of  the  power  supply 
of  a  special  industrial  region,  that  between  Boston,  Mass., 
and  Washington,  D.  C.  Had  the  war  continued,  Mr. 
Lane  said,  in  a  letter  written  in  February,  "it  is  certain 
that  we  should  now  be  facing  an  extreme  shortage  of 
power."  Forecasting  an  increased  demand  for  energy, 
he  continued:  "If  the  country  is  to  reap  the  benefit  of 
this  returning  wave  of  activity,  it  must  be  prepared  to 
furnish  industry  and  transportation  with  an  adequate  de- 
pendable and  economical  power  supply.  Only  by  in- 
creased economy  in  the  production  and  distribution  of 
power  will  it  be  possible  for  our  manufacturers  to  de- 
crease their  production  expenses  and  compete  success- 
fully in  the  world's  markets,  maintaining  at  the  same 
time  the  American  standard  of  wages  and  living." 

The  business  congress  at  Atlantic  City  adopted  this 
resolution :  "Industrial  activity  is  dependent  upon  the 
available  supply  of  power.  A  bill  which  would  affect  the 
development  of  hydro-electric  power  upon  waterways  and 
lands  which  are  subject  to  Federal  jurisdiction  is  now 
before  a  committee  of  conference  between  the  two  Houses 
of  Congress.  It  is  important  in  the  public  interest  that 
Federal  legislation  on  this  subject  should  be  enacted 
without  further  delay." 

The  British  Ministry  of  Reconstruction  and  the  Local 
Government  Board  are  already  putting  into  execution 
plans  for  more  industrial  power  that  were  made  as  a  con- 
sequence of  the  investigations  and  report  to  Parliament 
of  the  Coal  Conservation  Sub-Committee  of  the  British 


60  AMERICA  IN  WORLD  MARKETS 

Committee  on  Commercial  and  Industrial  Policy  After 
the  War.  Lord  Haldane  was  chairman  of  the  sub-com- 
mittee. The  following  extracts  from  its  report  are  preg- 
nant with  valuable  information  and  with  sound  doctrine: 

"In  the  United  States  the  amount  of  power  used  per 
worker  is  fifty-six  per  cent  more  than  in  the  United 
Kingdom.  If  we  eliminate  workers  in  trades  where  the 
use  of  power  is  limited,  or  even  impossible,  we  shall 
probably  find  that  in  the  United  States  the  use  of  power, 
where  it  can  be  used,  is  nearly  double  what  it  is  here. 
On  the  other  hand,  not  only  are  the  standard  rates  of 
wages  higher  in  the  United  States,  but  living  conditions 
are  better.  There  is  little  doubt  that  in  the  United  States 
the  average  purchasing  power  of  the  individual  is  above 
what  it  is  in  this  country,  and  that  this  is  largely  due  to 
the  more  extensive  use  of  power,  which  increases  the  in- 
dividual's earning  capacity. 

"The  best  cure  for  low  wages  is  more  motive  power. 
Or,  from  the  manufacturer's  point  of  view,  the  only  off- 
set against  the  increasing  cost  of  labor  is  the  more  exten- 
sive use  of  motive  power.  Thus  the  solution  of  the 
workman's  problem,  and  also  that  of  his  employer,  is  the 
same,  namely,  the  greatest  possible  use  of  power.  Hence 
the  growing  importance  of  having  available  adequate  and 
cheap  supply  of  power  produced  with  the  greatest 
economy  of  fuel." 

Elsewhere  the  report  says :  "Indeed  it  is  scarcely  pos- 
sible to  exaggerate  the  national  importance  of  the  prob- 
lem of  a  technically  sound  system  of  electrical  supply, 
because  it  is  essentially  one  with  the  problem  of  the  in- 
dustrial development  of  the  country,  which  largely  de- 
pends upon  increasing  the  net  output  per  head  of  the 
workers  employed  in  the  industries  in  which  power  can 


NEED  OF  MORE  POWER  IN  INDUSTRY     SI 

be  used."  And  again:  "At  the  present  time  the  supply 
of  electricity  in  Great  Britain  is  dealt  with  by  some  800 
undertakings.  The  average  generating  plant  capacity  of 
those  undertakings  which  have  power  stations  is  5,000 
horse  power,  or  about  one-fourth  of  the  capacity  of  one 
single  generating  machine  of  economical  size  and  about 
one-thirtieth  of  the  size  of  what  may  be  considered  as  an 
economical  'power'  station  unit.*  " 

The  French  Association  for  the  Development  of  Pub- 
lic Works  devotes  a  chapter  of  its  report  to  the  question 
of  water  power  and  indicates  that  it  has  arrived  at  con- 
clusions similar  to  those  reached  on  the  subject  by  in- 
vestigators in  the  United  States  and  in  Great  Britain. 
The  report  deals  particularly  with  the  industrial  prob- 
lems as  they  present  themselves  in  France.  It  states  that 
"the  speedy  utilisation  of  water  power  constitutes  the 
best  means  of  stimulating,  without  resorting  to  the  im- 
portation of  coal  at  ruinous  prices,  the  development  of 
public  utilities  and  of  great  industries  necessary,  not  only 
for  the  security,  but  also  for  the  economic  life  of 
France."  Dealing  with  the  projected  installation  of 
water-power  plants,  it  declares  that  "among  all  the  under- 
takings designed  to  complete  the  nation's  industrial  equip- 
ment, there  is  no  other  which  presents  a  character  of  such 
acute  urgency  or  which  appears  capable  of  combining  so 
effectively  the  assurance  during  war  of  the  supplies 
necessary  for  the  defence  of  the  nation,  and  the  repa- 
ration after  war  of  the  huge  losses  in  labor  and  in  capital 
caused  by  the  war."  The  report  proposes  that  the 
water-power  projects  be  put  into  execution  at  the  earliest 
possible  moment,  and  that  all  obstacles  standing  in  their 
way  be  swept  relentlessly  aside. 

Italy,  handicapped  by  lack  of  coal,  has  been  turning  to 


62  AMERICA  IN  WORLD  MARKETS 

profit  her  important  resources  in  water  power.  She  is 
now  utilising  about  1,000,000  horsepower  out  of  the 
total  of  more  than  5,000,000  which  she  could  derive 
from  her  cascades  and  streams.  Her  hydraulic  power 
is  distributed  all  through  the  Peninsula  from  north  to 
south,  her  most  important  industrial  centres  being  in 
proximity  to  powerful  water  courses,  usually  with  very 
rapid  currents.  In  November,  1916,  the  Government 
appointed  a  Superior  Council  of  Waters,  comprising 
scientists  and  technical  experts,  whose  duty  it  is  to  in- 
vestigate and  report  on  all  projects  for  the  development 
of  hydraulic  energy. 

Italian  experts  are  at  work  on  the  problem  of  drawing 
the  fullest  economical  benefit  from  the  country's  water 
power,  not  merely  by  the  generation  of  electric  energy, 
but  by  the  systematic  co-ordination  of  all  the  practical 
uses  to  which  that  power  can  be  turned.  Thus  1,000,000 
hydraulic  horsepower  will  save  the  country  at  least  $30,- 
000,000  annually  on  imported  coal.  A  like  amount  of 
power  would  permit  new  industrial  development  of 
great  value.  Four  hundred  thousand  horsepower  would 
save  Italian  agriculture  some  $20,000,000  on  imported 
nitrates  and  imported  grain.  Less  than  100,000  horse- 
power would  effect  a  yearly  saving  of  $8,000,000  by  per- 
mitting the  working  of  the  magnetised  iron  deposits  of 
the  Valley  of  Aosta  and  the  reduction  of  the  importation 
of  iron  by  some  65,000  tons.  With  130,000  more  horse- 
power 120,000  tons  of  pig-iron  could  be  recovered  every 
year  from  pyrite  cinders  with  a  gain  of  $2,600,000,  and 
an  extra  100,000  would  serve  for  the  treatment  of 
Italy's  zinc  ores,  of  which  150,000  tons  are  annually 
mined  and  exported  for  smelting.    The  profit  here  would 


NEED  OF  MORE  fOWER  IN  INDUSTRY     6S 

be  $8,000,000.  Hundreds  of  millions  of  dollars  would 
thus  be  won  for  Italy  every  year.  On  her  water  power 
Italy  counts  for  economic  salvation  and  future  indus- 
trial greatness. 


CHAPTER  VIII 

SLANDERS  AGAINST  AMERICAN  BUSINESS 

Tales  Spread  Abroad  About  "Commercial  Corruption" — 
A  Dr.  Jekyll  and  Mr.  Hyde  Idea — Responsibility  of 
Our  Own  Politicians  and  Organs  of  Publicity — A 
Charge  Made  by  Mr.  Gompers — Remedies  Needed  to 
Re-establish  a  Right  Understanding. 

The  good  repute  of  American  business  is  a  subject 
that  is  likely  to  be  of  more  and  more  interest  to  commer- 
cial organisations  in  the  future.  There  is  a  feeling  in 
many  quarters  that  the  foreigner  must  be  inspired  with 
new  views  regarding  the  honesty  and  integrity  of  trade 
and  commerce  as  conducted  in,  and  from,  the  United 
States,  and  that  the  demagogue  at  home  should  be  taught 
that  slander  is  unprofitable. 

At  the  business  congress  in  Atlantic  City  this  was  one 
of  the  topics  discussed  in  private  gatherings.  It  was  re- 
called that  the  Germans  had  made  it  a  national  policy 
to  blacken  American  business  generally.  Their  reputed 
official  newspapers,  the  North  German  Gazette,  the 
Frankfort  Gazette  and  the  Cologne  Gazette,  were  the 
leaders  in  this  campaign  of  vilification. 

These  publications  had  their  weekly  "special  corre- 
spondence" from  the  United  States.  The  correspondence 
invariably  fell  into  two  sections.  The  first  part  solemnly 
and  ponderously  narrated  the  doings  at  some  German 
Sangerbund   or  Turnverein   somewhere  in   the   United 

54 


SLANDERS  AGAINST  AMERICAN  BUSINESS     55 

States,  and  the  second  part,  just  as  invariably,  dealt  with 
"American  Business  Scandals."  An  alternative  caption 
was  "Commercial  Corruption  in  the  United  States."  The 
special  correspondence  of  the  three  inspired  organs  was 
copied  by  the  minor  newspapers  throughout  the  Empire. 
The  Wolff  Bureau  also  disseminated  cable  despatches 
from  the  United  States  magnifying  the  most  trivial  com- 
mercial incidents  and  distorting  the  utterances  of  Ameri- 
can politicians  so  as  to  create  striking  "scandal"  and 
"corruption"  stories.  Other  countries  of  Europe  were 
also  affected  by  the  virus  of  this  systematic  campaign. 

In  starting  on  the  new  phase  of  American  plans  for 
industrial  and  commercial  development  many  American 
business  men  are  of  the  opinion  that  effective  measures 
should  be  undertaken  for  the  purpose  of  undoing  the 
evil  already  done,  and  of  asserting  at  home  and  abroad 
the  determination  of  American  corporations  to  vindicate 
the  high  reputation  to  which  they  are  justly  entitled,  and 
to  combat  all  future  attempts  to  reflect  on  the  honor  and 
exalted  principles  and  methods  of  American  business  as 
a  whole. 

One  American  manufacturer  told  his  hearers  at  At- 
lantic City  that,  in  connection  with  the  business  which 
his  company  does  in  countries  around  the  world  he 
travels  in  many  lands  and,  like  all  those  American  travel- 
lers who  endeavor  to  penetrate  the  thoughts  of  the  for- 
eign business  man,  he  has  had  the  painful  experience  of 
hearing  American  trade  methods  alluded  to  as  corrupt 
and  dishonest,  as  if  the  statement  were  accepted  as 
axiomatic.    He  cited  instances. 

In  a  railway  train  in  Eastern  Europe  a  Budapest  cot- 
ton spinner  was  disserting  on  the  "low  commercial  moral- 
ity" of  the  Americans.    The  American  made  the  Hun- 


56  AMERICA  IN  WORLD  MARKETS 

garian  eat  his  words,  but  only  after  a  display  of  energetic 
determination,  in  which  the  muscular  physique  of  the 
American  traveller  may  be  credited  with  having  had  its 
due  spiritual  effect.  As  a  guest  in  the  Strangers'  Club 
in  Buenos  Aires,  he  had  the  unpleasant  experience  of 
hearing  an  agent  of  a  European  firm  refer  contemptu- 
ously to  the  "lack  of  ethical  principles"  among  American 
manufacturing  concerns.  Again  the  American  was  up  in 
arms,  and  as  he  happened  to  be  aware  that  this  particu- 
lar agent  was  also  the  representative  in  the  Argentine 
Republic  of  a  well-known  American  machinery  company, 
he  forced  from  the  man  what  amounted  to  an  abject 
apology. 

"The  time  has  come,"  this  speaker  declared,  "to  take 
action  in  the  matter,  and  it  is  a  case  of  organising  and 
of  deciding  on  the  methods  best  adapted  for  the  purpose 
to  be  attained.  The  parties  at  whose  door  we  should 
in  the  first  instance  lay  the  blame  for  the  state  of  affairs 
we  denounce  are  Americans  themselves.  And  not  all  of 
them  are  mere  demagogues  or  soap-box  orators.  They 
are  in  many  instances  men  filling  high  positions  to  which 
they  have  been  elevated  by  the  suffrages  of  the  people." 

He  emphasised  his  point  by  quotations  from  speeches 
and  from  interviews  and  signed  articles  in  newspapers 
and  periodicals.  He  told  how  he  made  it  a  practice  of 
following  up  the  slanderous  statements  and  how  more 
than  once  he  had  succeeded  in  exacting  apologies  in  this 
connection  from  men  in  public  life.  Certain  newspapers 
in  this  country  which  systematically  supplied  the  basis  for 
the  stories  of  American  business  corruption  circulated 
by  the  German  press  agencies  have  also  been  tabulated 
by  him  for  continuous  surveillance. 

"Now  it  is  a  fact,"  he  went  on,  "that  American  busi- 


SLANDERS  AGAINST  AMERICAN  BUSINESS      57 

ness  generally  is  conducted  on  a  scale  as  lofty  as  has  ever 
been  reached  in  any  country.  Indeed,  in  dealing  with  the 
foreigner  Americans  have  frequently  been  animated  by 
the  humanitarian  principles  they  have  revealed  in  their  at- 
titude and  conduct  in  this  war.  Yet  this  abuse  tends  to 
rob  us  of  what  is  rightfully  our  due,  to  destroy  the  posi- 
tion on  which  we  should  stand  and  even  to  place  us  low 
in  the  moral  ranks. 

"The  impression  is  created  abroad  that  the  American 
business  man  is  a  being  of  two  natures,  a  Dr.  Jekyll  in 
charity  and  a  Mr.  Hyde  in  business.  Our  public  men 
talk  as  if  they  were  not  aware  that  their  words  when  they 
denounce  American  business  are  scattered  broadcast, 
that  there  is  a  real  propaganda  picking  them  out,  suppress- 
ing the  compliments  and  the  qualifications  and  publishing 
only  the  abusive  statements,  that  these  are  quoted  and 
repeated  and  that  they  sink  in.  We  should  have  an  asso- 
ciation which  would  make  it  its  business  to  refute  and  de- 
nounce openly  any  public  official  making  untrue  state- 
ments about  our  industrial  and  commercial  honor  and  we 
should  have  a  wide  line  of  publicity  to  do  justice  to  the 
integrity  of  American  commercial  methods." 

Rash  general  statements  regarding  hostility  between 
employers  and  employed  should  be  an  unpardonable  of- 
fence in  the  new  conditions,  and  anything  that  might 
seem  a  basis  or  pretext  for  them  should  be  scrupulously 
avoided.  Mr.  Samuel  Gompers,  president  of  the  Ameri- 
can Federation  of  Labor,  was  quoted  in  the  press  in 
January,  19 19,  as  having  stated  in  a  signed  article:  "The 
war  brought  a  better  understanding  between  capital  and 
labor  than  ever  existed  before.  It  was  the  hope  of  many 
— and  surely  of  all  labor — that  the  co-operative  relations 
that  grew  up  when  the  employer  and  the  employee  fought 


58  AMERICA  IN  WORLD  MARKETS 

side  by  side  for  America  might  endure  through  the  years 
of  peace.  But,  from  mutterings  that  already  have  come 
from  capitaHsts,  it  would  seem  that  theirs  was  a  friend- 
ship during  the  war  of  only  a  surface  nature;  a  friend- 
ship superficial  rather  than  sincere. 

"And  that  is  regrettable.  Labor  does  not  want  con- 
flict with  capital.  Labor  yearns  for  peace  and  tranquil- 
ity. It  asks  for  a  fair  deal — and  nothing  more.  It  cur- 
ries no  favors;  seeks  no  gifts  from  capital.  But  some  of 
the  industrial  monarchs  have  already  placed  themselves 
on  record  as  being  opposed  to  giving  to  labor  even  the 
square  deal  it  has  asked  for." 

This,  if  it  were  so,  could  not  but  be  a  deplorable  con- 
dition of  affairs.  But,  unsupported  by  an  enumeration 
of  facts  to  justify  so  sweeping  an  assertion  regarding  the 
seeming  lack  of  sincerity  in  the  friendship  of  capitalists 
for  the  workers  and  the  prospect  of  their  co-operative  re- 
lations not  being  enduring,  such  statements  invariably 
leave  the  impression  that  they  are  of  the  kind  made  by 
those  who,  through  a  habit  of  considering  only  one  side 
of  a  question,  have  formed  a  parti  pris,  or  those  who, 
having  what  they  regard  as  a  political  motive,  indulge  in 
exaggerations  as  a  political  privilege.  Attacks  on  one 
side  of  the  business  community,  if  they  are  rash  and  ex- 
aggerated, are  an  injury  and  an  offence  to  the  whole  busi- 
ness community.  By  their  cumulative  effect  they  can  be 
distinctly  harmful. 

Heretofore,  when  made  against  the  employers  in  a 
body,  they  have  been  allowed  to  stand  uncontradicted. 
There  was  no  leader  or  organisation  to  attend  to  the  con- 
tradicting. Now  that  American  industry  has  shown  its 
ability  to  get  together  in  congress,  the  way  should  be 


SLANDERS  AGAINST  AMERICAN  BUSINESS     59 

easy  for  making  arrangements  not  to  allow  statements  or 
actions  to  go  unchallenged  if  their  effect  is  liable  to  be 
disruptive  of  the  solidarity  that  must  be  conserved  be- 
tween the  constituent  elements  of  American  industry. 


CHAPTER  IX 


INDUSTRIAL  RELATIONS 


Capital — Catch- Words  That  Stigmatise  American  Busi- 
ness— Labor  the  Nursery  of  Capital — Their  Inter- 
ests Undivided. 

Labor — The  American  Workingman  Refuses  to  Be 
Labelled — Appreciates  His  Rights  as  an  American — 
Labor  Leadership. 

Representation  of  Labor — Participation  in  Industrial 
Administration — Error  of  Judging  from  Extremes — 
The  LaFollette  Law — Where  Labor  May  Be 
Brought  In — Welfare  Work  Improperly  Conceived. 

Minimum  Wage — 111  Success  in  French  Cities — A  Brit- 
ish Plan — The  "Minimum  Plus" — International  Pro- 
posals. 

Capital 

The  politicians  divided  industry  into  two  classes  and 
built  up  a  reputation  for  each.  Capital  was  immoral; 
labor  moral.  Furthermore,  they  said,  there  was  "antag- 
onism," essential  and  fundamental;  the  antagonism  of 
the  lion  and  the  lamb.  Labor  was  welcome  in  national, 
State  and  local  administration.  It  was  welcome  in  poli- 
tics. In  fact,  politics  was  primarily  in  behalf  of  labor, 
or  "the  producers."  Capital's  other  name  was  "private  in- 
terests," or  "special  privilege,"  or  "predatory  wealth." 
Words  were  weapons. 

Capital  must  be  kept  out  of  administration  and  out  of 
politics.  For  capital  corrupts  legislation.  This  was  a 
dogma  with  the  politician,  one  of  the  dogmas  that  kept 

60 


INDUSTRIAL  RELATIONS  61 

his  control  secure.  Capital's  one  aim  and  purpose,  if  it 
were  admitted  to  a  share  in  public  affairs,  would  be  to 
corrupt  legislation.    Therefore  capital  must  be  kept  out. 

And  business  men  were  bluffed  and  stayed  out,  because 
those  whom  the  politicians  classed  as  capital,  the  pro- 
ducers of  the  nation's  wealth  and  the  makers  of  the 
nation's  greatness,  did  not  like  to  own  up  to  it  that  they 
were  capital.  A  stigma  had  been 'attached  to  the  word, 
and  it  was  enough  to  scare  them  away,  to  make  them 
accept  the  condition  of  aloofness  from  public  affairs  that 
was  allotted  to  them  by  the  politician. 

The  business  men  who  disregarded  the  ban  and  entered 
public  life  usually  withdrew  in  disgust.  They  could  not 
bring  themselves  to  use  the  weapons  of  the  politician  to 
maintain  their  position.  American  business,  consequent- 
ly, did  not  have  its  full  share  in  American  public  life. 

When  the  great  emergency  of  the  war  came,  the  poli- 
tician was  helpless  and  the  business  men  were  called  in. 
They  saved  the  day. 

It  is  inconceivable  that  American  business  will  permit 
itself  to  be  driven  back  to  the  old  condition,  that  it 
will  continue  to  be  intimidated  by  old  phrases  and  dog- 
mas. If  business  men  are  capital,  then  let  them  accept 
the  title.  But  let  them  set  their  faces  against  the  poli- 
tician who  in  the  future  may  attempt  to  divide  capital 
and  labor  on  the  basis  of  any  antagonism.  The  "capital" 
of  the  politicians  is  of  course  only  a  figment  of  the  imagi- 
nation; and  so,  too,  indeed  is  "labor." 

Capital  after  all  is  the  aggregation  of  those  who  pro- 
duce and  more  specifically  of  those  who  originate,  who 
take  the  chances  and  who  create  and  furnish  opportunities 
for  work.  Capital  is  not  merely  the  manufacturer  and 
the  merchant,  the  banker  and  the  professional  man ;  it  is 


est  AMERICA  IX  WORLD  MARKETS 

the  farmer  and  the  miner,  the  shopkeeper  and  the  worker 
of  every  kind  who  furnishes  work  and  a  means  of  exist- 
ence for  others.  Between  capital  and  labor  there  is,  of 
course,  no  wall  of  obstruction- 
Capital  formerlv  was  labor.  Capital,  consequently,  is 
growing  and  labor  is  its  nursery*.  The  worker  who  is  in 
Ae  ranks  of  labor  to-day  may  be  in  the  ranks  of  cs^ital 
tomorrow,  and  without  ceasing  to  be  a  worker.  Many 
who  are  capital  at  the  present  time  will  later  on  be  labor, 
with  a  prospect  of  again  reverting  to  the  role  of  capital 
There  is  a  constant  passing  back  and  forth  between  the 
two  grades,  and  the  one  great  stimulus  to  ambition  and 
to  the  joy  of  life  and  of  work  in  a  free  country  like 
America  is  the  fact  that  the  ranks  of  capital  are  always 
c^)en  and  steadily  receiving  recruits  from  the  ranks  of 
labor. 

\Miatever  benefits  labor  must  benent  capital,  and 
whatever  injures  capital  must  injure  labcr.  for  the 
interests  are  mutual  and  they  are  interdependent  Capital 
can  have  no  conceivable  motive  in  preventing  labor  from 
organising.  Newly  organised  bodies  of  workers  are 
hardest  to  deal  with,  because  usually  they  seem 
imbued  with  the  idea  tiiat  their  organisation  or 
union  frees  them  from  the  obligation  of  co- 
operaticHi  and  co-ordination  and  can  bring  to  them 
a  millennium  of  good  things,  but  time  heals  that 
troable  and  it  is  an  established  fact  to-day  that  capital 
realises  that  it  is  greatly  to  the  benefit  of  the  common 
interests  that  labor  should  be  organised.  The  more  labor 
is  skilled,  the  more  it  is  educated,  the  more  lofty  its  views 
and  the  greater  its  self-respect  and  its  patriotic  spirit,  the 
more  surely  will  it  understand  and  appreciate  its  status 
in  the  common  life  and  the  better  will  it  fit  into  its  place 


INDUSTRIAL  RELATIONS  63 

in  industry.  And  as  capital  should  organise,  not  at  the 
behest  of  any  outsider  or  according  to  plans  formulated 
for  it  from  without,  but  only  for  its  own  interest  and  with 
proper  account  taken  of  the  interests  of  the  whole  com- 
munity, so  also  should  labor. 

The  only  true  conception  of  business  is  that  which  con- 
siders it,  not  as  a  one-sided  affair,  but  as  something  in 
which  both  capital  and  labor  constitute  an  inseparable 
and  integral  whole.  The  establishing  of  correct  ideas  in 
this  regard  is  the  dut>'  of  both  capital  and  labor  and  it  is 
to  their  common  interest  to  take  away  from  the  politi- 
cian the  catch-phrases  and  fallacies  that  have  allowed  him 
to  remain  in  power  by  creating  an  artificial  gulf  between 
capital  and  labor. 

Labor 

The  American  worker — it  is  an  encouraging  and  com- 
forting fact — refuses  to  be  put  into  a  category'  connoting 
inferiority  and  to  remain  there  branded  or  tagged.  The 
German  worker  decidedly  was  a  worker  and  accepted  a 
grade  allotted  to  him  in  his  class,  first,  second,  or  third. 
He  was  a  master  tailor,  a  journeyman  tailor  or  a  second- 
rank  tailor,  and  so  for  the  other  trades.  And  such  for 
good  and  all  he  seemed  willing  to  remain. 

Some  sociologists  and  self-appointed  class  leaders 
among  us  wonder  why  a  great  chance  is  being  missed, 
why  there  is  no  "labor  party"  in  this  cotmtry,  since  the 
American  workers  could,  as  such,  wield  so  tremendous  a 
power.  These  students  of  social  philosophy  are  perhaps 
too  busy  studying  to  observe  the  ways  and  traits  of  those 
among  whom  they  live.  They  have  not  observed  the 
American  workingman — the  worker  worthy  of  this  title. 
They  are  probably  not  aware  that  if  a  "workingman's 


64  AMERICA  IN  WORLD  MARKETS 

club"  were  established,  or  a  "workingman's  theatre,"  or 
a  "workingman's  department  store,"  the  American  work- 
ingman  and  his  wife  would  give  it  a  wide  berth. 

The  Bolshevist  fraternity  show  more  discernment  when 
they  class  the  American  workingman  as  a  bourgeois  and 
his  wife  as  a  bourgeoise.  The  American  workingman 
and  his  wife,  as  far  as  their  circumstances  permit,  attend 
the  best  theatres,  buy  in  the  best  stores  and  assert  their 
right  to  take  an  interest  in  American  politics  on  the  same 
footing  as  the  so-called  best  in  the  land.  Precisely  because 
they  are  Americans  they  feel  that  they  are  as  good  as  the 
best,  and  that  they  are  on  the  way  always  to  better  con- 
ditions. 

Mr.  Charles  M.  Schwab  can  harangue  the  workers  in 
an  American  shipyard  and  gain  their  pleased  attention, 
addressing  them  as  his  "fellow-workers,"  and  enlivening 
his  speech  by  anecdotes  of  his  own  career  as  a  worker. 
But  the  politician  or  agitator  or  other  superior  per- 
son who  should  try  to  stir  a  gathering  of  real  American 
workingmen  by  addressing  them  as  "workers"  and  put- 
ting them  in  a  class  for  the  purposes  of  his  appeal  would 
receive  short  shrift  from  them.  The  prerogative  of  being 
Americans,  free  and  progressive  and  with  an  indepen- 
dent title  to  interest  and  participation  in  the  development, 
politically,  socially  and  industrially,  of  their  country,  is 
one  that  they  are  not  going  to  surrender  at  the  invitation 
of  some  newcomer  with  ulterior  motives  of  his  own. 
They  have  ambition  and  they  have  no  de^sire  to  see  it  re- 
stricted by  annexing  themselves  to  a  party  that  will  try 
to  hold  them  permanently  by  putting  on  them  the  brand 
"Labor,"  in  a  sense  of  which  they  do  not  approve. 

The  American  workingman  may  tell  you  he  is  working 
for  the  Government,  for  a  corporation,  for  an  individual. 


INDUSTRIAL  RELATIONS  65 

In  reality  he  feels  that  he  is  working  for  himself.  His 
"boss"  the  other  day  was  working  for  others.  He  him- 
self has  the  prospect  of  being  a  "boss,"  and  of  providing 
work  and  remuneration  for  others.  Not  that  that  pre- 
cisely is  his  ambition,  for  the  "boss"  notion  is  a  bit  odious; 
but  it  is  a  concrete  way  of  conceiving  and  expressing  the 
reward  of  systematic,  persevering  work,  of  initiative  and 
enterprise,  of  the  opportunity  that  being  an  American 
provides. 

The  American  workingman  is  ripe  for  the  inculcation 
of  the  true  doctrine  regarding  his  status,  for  the  over- 
throwing of  the  interested  politician's  catch  phrases  and 
of  the  treacherous  agitator's  flattering  assertions  that 
the  workingman  is  the  producer  and  consequently  the 
rightful  dominant  factor  in  industry.  The  American 
workingman  knows  that  he  is  an  essential  factor  in  pro- 
duction, and  if  assured  of  proper  recognition  in  the  mat- 
ter, assured  that  the  other  factors  in  production  recognise 
that  he  too  fills  a  primary  role  and  has  vital  rights  to  con- 
sideration, he  will  not  be  led  to  affirm  that  his  share  is  the 
paramount  one ;  he  may  be  counted  on  to  co-operate  with 
the  other  essential  factors,  to  fill  his  role  as  a  part  of  busi- 
ness, as  an  industrialist  and  a  business  man.  Towards 
this  desirable  result  the  old-time  politician  need  not  be 
expected  to  lend  any  aid.  If  it  is  to  be  brought  about, 
it  is  for  those  engaged  in  industry  to  undertake  the 
effort.    The  cause  of  labor  deserves  new  treatment. 

The  prominent  and  authoritative  representatives  of  the 
manufacturers  in  America  invariably  discuss  labor  in 
sympathetic  terms.  They  are  chary  of  criticism,  obvi- 
ously anxious  to  avoid  wounding  any  susceptibiHties. 
Castigations  of  labor  organisation  that  are  occasionally 
printed  in  this  country  usually  come  from  spokesmen  of 


66  AMERICA  IN  WORLD  MARKETS 

other  lands.  Thus  a  prominent  British  industrialist,  head 
of  airplane  and  other  factories,  who  in  Febi'uary  of  this 
year  was  in  the  United  States  on  business,  voiced  for 
publication  a  manufacturer's  view  of  trade  unionism  as  it 
is  controlled  in  Great  Britain,  making  an  allusion  also 
to  the  control  of  organised  labor  in  America.  Among 
other  things  he  said : 

"Trade  union  officials  have  always  been  afraid  to  let 
the  workingmen  know  too  much  in  fear  of  losing  their 
own  comfortable  jobs.  I  have  repeatedly  explained  to 
them  that  by  controlling  the  hours,  that  is,  letting  the  men 
work  fourteen  hours  if  necessary  when  there  is  work  to 
be  done,  and  slacking  down  to  four  when  there  is  not 
much  doing,  they  would  avoid  the  discharge  of  workmen 
from  factories  and  every  one  would  benefit  all  around. 

"At  the  present  time,  instead  of  being  the  most  up-to- 
date  and  efficient  organisation  trade  unionism  in  Eng- 
land is  one  of  the  largest  and  most  antediluvian  concerns 
extant.  The  sooner  the  workingman  knows  that  his 
leadership  is  wrong,  his  premises  wrong,  his  ideals  de- 
based, his  personal  benefit  from  them  minute,  and  his 
waste  of  opportunity  the  greatest  in  any  organisation  in 
the  world,  he  will  begin  to  want  a  change.  He  wants 
it  now  in  England,  but  there  are  no  politicians  to  en- 
lighten him,  for  they  have  a  party  to  fear  and  no  leader 
whom  they  dare  listen  to  openly. 

"Democracy  has  never  been  a  great  judge  of  a  leader. 
Democracy  might  have  chosen  a  picturesque  figure  like 
the  late  Lord  Kitchener,  but  never  a  genius  like  Marshal 
Foch.  Labor  mistakes  itself  for  democracy,  but  it  is  only 
the  organised  part  of  democracy.  Labor  by  organisation 
controls  so  much,  yet  it  has  failed  completely.  Every- 
body but  labor  knows  it  has  failed.  To  organise  a  strike 


INDUSTRIAL  RELATIONS  67 

is  not  a  success.     To  have  had  to  strike  means  failure. 

"Think  of  the  difference  in  the  ideals  and  character  of 
the  man  who  went  to  the  trenches,  his  ungrudging  pres- 
entation of  his  best  effort,  his  best  brains  and  his  Hfe  if 
need  be,  with  the  same  man's  slothful  folly  in  the  factory 
under  trade  unionism. 

"When  men  take  twice  as  long  to  build  even  their  own 
houses,  they  increase  their  rents  and  in  this  method  of 
stretching  hours  out  they  have  increased  the  cost  of  liv- 
ing before  they  increased  their  wages.  I  estimate  that 
workingmen  in  the  United  States  in  not  using  tlieir  brains 
and  hands  for  their  own  good  are  losing  fully  $4,000,000 
an  hour,  or  $8,736,000,000  per  annum.  Rich  men  are 
the  mainspring  of  enterprise  and  advancement  and  la- 
bor's profit.  Rich  men  are  rich,  not  because  they  have 
robbed  the  workingman,  but  in  spite  of  the  workingman 
having  robbed  himself." 

The  fundamental  right  of  labor  is  to  full  remuner- 
ation for  work  accomplished.  If  it  be  true  that  it  is  the 
policy  of  labor  leaders  in  England  or  elsewhere  de- 
liberately to  protract  the  time  in  which  a  given  work  can 
be  performed,  then  indeed  there  is  justification  for  the 
charge  that  a  form  of  "slavery"  is  being  imposed  on  the 
workers.  To  force  or  to  induce  the  workers  in  a  plant 
to  take  eight  hours  to  do  work  they  could  accomplish  in 
four  is  to  mulct  them  by  putting  in  four  unnecessary 
hours  without  pay  and  to  make  them  party  to  paralysing 
fifty  per  cent  of  the  productive  power  of  the  plant,  to 
nullifying  the  opportunity  for  an  equal  number  to 
obtain  employment,  to  destroying  potential  wealth  by 
impeding  production,  to  preventing  the  cost  of  living 
from  being  reduced  and  to  inflicting  indirectly  an  injury 
on  the  whole  public.    The  object  of  industry  is  produc- 


68  AMERICA  IN  WORLD  MARKETS 

tion.  Without  work  there  cannot  be  production;  with- 
out production  there  can  l^e  no  wages.  If  these  elemen- 
tary facts  were  kept  constantly  in  view  by  the  individual 
worker,  much  of  the  enormous  waste  caused  by  indus- 
trial strife  would  probably  be  eliminated. 

It  is  only  human  to  be  impatient  of  criticism  and  re- 
proof. The  manufacturer  will  instinctively  resent  being 
told  how  to  conduct  his  own  business,  and  a  body  of 
labor  may  insist  on  being  allowed  to  manage  its  own 
affairs.  Whether  on  the  side  of  manufacturers  or  of 
labor  it  is  rare  that  the  most  is  made  of  the  opportunities 
that  present  themselves.  Human  weakness,  especially  in 
the  direction  of  human  slothfulness,  to  use  the  English 
magnate's  word,  is  there  to  prevent  it.  All  men  object 
to  being  driven;  they  do  not  want  "efficiency"  tests  ap- 
plied to  them;  they  are  not  machines;  they  refuse  to  be 
commodities.    Man  is  not  in  this  world  just  for  industry. 

But  criticism  may  do  good,  for  it  may  point  out  evils 
and  losses  that  have  been  overlooked  or  have  not  been 
concretely  visualised.  The  manufacturer,  while  he  may 
not  welcome  advice,  will  profit  by  it,  if  judicious  and 
beneficial.  So  also  may  labor  be  expected  to  do  under 
like  conditions.  If  the  British  manufacturers'  restrictions 
— not  so  much  regarding  labor,  be  it  noted,  as  regarding 
labor  leadership — are  well  founded  and  indicate  a  spe- 
cific and  hitherto  neglected  matter  for  improvement  in 
the  prime  interest  of  labor  itself,  they  will  have  justified 
their  publication  and  may  lead  to  desirable  changes. 

Representation  of  Labor 

The  desirability  of  according  to  the  workers  participa- 
tion in  the  councils  of  industrial  administration,  and  how 


INDUSTRIAL  RELATIONS  69 

this  is  to  be  provided  for  and  what  measure  of  partici- 
pation should  be  accorded,  will  of  course  be  the  subject 
of  increasing  study  on  the  part  of  those  directing  the 
industries. 

Here  again  we  are  confronted  with  extremes,  and  in- 
terested parties  on  opposite  sides  are  unfortunately  prone 
to  draw  arguments  from  the  extremes.  In  this  case  one 
extreme  is  a  total  denial  to  one  element  in  production 
of  participation  in  the  policy  of  production,  and  at  the 
other  end  is  an  extreme  such  as  that  typified  in  the 
Kerensky  Prikase  No.  I,  which  conferred  on  the  Rus- 
sian soldiers  the  right  to  use  their  own  better  judgment 
about  accepting  or  rejecting  the  orders  of  their  officers. 

There  are  some  who  have  seen  a  precursor  of  the  Bol- 
shevist doctrine  in  our  own  Seamen's  Act,  the  La  Fol- 
lette  Law,  which  they  regard  as  indicating  a  tendency  to 
constitute  the  workers  on  shipboard,  not  merely  the  ar- 
biters of  their  own  fate,  but  also  the  dominant  voice 
with  regard  to  the  handling  of  the  ship.  This,  it  would 
seem,  must  be  an  extreme  opinion,  for,  however  demo- 
cratic the  flag  under  which  the  ship  sails,  a  ship  is  one 
place  which  calls  for  autocratic  government.  A  ship's 
captain  is  and  seemingly  must  be  an  autocrat,  whatever 
safeguards  against  abuse  of  power  we  may  erect  around 
him.  If  this  is  so,  and  the  Seamen's  Act  or  any  other 
law  should  prove  to  be  an  attempt  against  the  auto- 
cratic government  of  the  ship,  it  will  not  be  allowed  to 
endure.  Incidentally  to  the  La  Follette  Law,  it  may  be 
observed,  first,  that  although  enacted  as  far  back  as 
191 5,  the  war  caused  it  to  be  disregarded,  so  that  hith- 
erto there  has  been  no  way  of  judging  how  it  will  work 
out;  second,  that  the  point  raised  to  the  effect  that  the 
wages  stipulation  would  make  the  cost  of  operation  of 


70  AMERICA  IN  WORLD  MARKETS 

ships  of  American  registry  prohibitive  is  not  conceded 
by  all  of  the  best  judges,  some  of  them  affirming  that 
wages  represent  only  about  four  per  cent  of  the  cost  of 
operation  of  a  cargo  vessel  and  will  represent  a  still  lower 
percentage  with  the  projected  general  introduction  of  oil 
fuel  on  American  ships,  and  furthermore  that  wage  in- 
crease on  American  ships  would  force  a  corresponding 
increase  on  the  ships  of  other  countries,  and  finally  that 
the  obligation  that  a  certain  percentage  of  the  crew 
shall  be  able  to  understand  commands  in  the  English 
language  may  ultimately  be  interpreted  as  permitting  the 
employment  of  coolies  who  have  a  knowledge  of  "pigeon 
English."  So  that  after  all  the  Seamen's  Act  may  not 
be  an  appropriate  case  for  argument  regarding  the  ad- 
ministrative representation  of  labor.  However  that  may 
be,  it  will  be  desirable  not  to  take  any  stand  on  the  ques- 
tion based  on  extremes. 

The  right  path  lies  in  between.  Many  industries  have 
been  following  it,  the  workers  receiving  consideration  as 
an  essential  element.  These  industries  will  be  ready  to 
revise  their  methods  and  to  inquire  what  fuller  form 
of  representation  may  be  due  to  the  working  element 
and  others  can  be  induced  to  follow  the  example.  Both 
executives  and  workers  must  come  to  realise  that  com- 
mon sense  forbids  the  exaggeration  of  extreme  instances, 
that  in  the  common  interest  there  must  be  conciliation. 
The  millennium  has  not  arrived  and  human  frailty  will 
continue  to  manifest  itself  no  less  among  the  elements 
of  industry  than  wherever  men  are  thrown  into  inter- 
course with  one  another.  There  is  always  something  to 
condone  on  each  side  and  progress  and  civilisation  de- 
pend on  good  will  and  co-operation. 

We    may    count    on    it    that    capital    and    labor    in 


INDUSTRIAL  RELATIONS  71 

America  will  agree.  If  they  do  not,  then  we  shall  have 
come  to  the  end  of  a  fine  era  of  civilisation  in  which 
America  had  taken  a  noble  and  conspicuous  part. 

Capital  and  labor,  by  the  way,  might  be  good  words 
to  abolish.  Capital  has  had  a  note  of  opprobrium  at- 
tached to  it  and  Labor  has  been  made  the  object  of 
abuse  and  misuse,  so  that  to-day  the  words  do  not  fit- 
tingly denote  respectively  the  body  ^  of  American  manu- 
facturers and  merchants  and  the  body  of  American  work- 
ers. No  offence  may  be  implied  in  speaking  of  "im- 
proving labor  conditions,"  "rehousing  labor"  and  so 
on,  but  the  phrases  are  calculated  to  be  offensive,  as  they 
carry  the  idea  of  charity,  of  condescending  generosity, 
from  above  downwards.  If  the  workers  themselves  were 
understood  to  be  taking  part  in  the  planning,  improving 
and  rehousing,  so  that  the  changes  and  reforms  were  to 
be  effected  by  their  initiative  as  much  as  by  that  of  any 
ethers,  it  would  be  a  different  matter.  American  work- 
ers must  be  treated  as  independent,  self-respecting,  full- 
grown  members  of  the  community  if  the  politician's  and 
the  agitator's  game  is  to  be  nullified  and  if  conciliation 
and  co-operation  are  to  be  brought  about  in  American 
industry. 

The  democracy  of  industry  is  a  goal  to  aim  at.  Indus- 
try will  be  democratised  when  adequate  recognition  is 
generally  accorded  to  all  its  various  component  elements. 
The  trouble  has  been  that,  in  the  past,  outsiders  have 
been  legislating  to  impose  on  industry  their  notion  of 
its  needs  in  the  way  of  democracy.  The  change  can  be 
properly  effected  only  from  within.  The  internal  evo- 
lution of  industry  up  to  a  true  democracy  would  unques- 
tionably prove  to  be  the  most  potent  influence  in  stabilis- 


72  AMERICA  IN  WORLD  MARKETS 

ing  the  national  regime  and  in  constituting  America  the 
model  for  all  governments. 

We  have  heard  it  affirmed  as  a  motive  for  discontent 
on  the  part  of  workers  in  our  period  that  the  soulless  cor- 
poration had  come  along  to  hurt  the  interests  of  the 
worker ;  that  in  the  old  days  when  a  single  family  owned 
the  plant  the  head  of  the  family  took  a  direct  personal 
interest  in  each  worker,  sympathising  with  him  in  his 
woes,  having  the  doctor  attend  him  when  he  was  sick  and 
otherwise  serving  as  a  generous  patron,  whereas  now, 
with  a  corporation  in  control,  all  this  beneficence  was 
gone.  Now  if  that  is  the  only  change  which  the  corpo- 
ration has  brought,  it  is  something  to  rejoice  over. 

The  worker  in  other  lands  may  like  to  be  patronised, 
to  be  an  humble  item  in  a  feudal  system,  but  the  further 
we  get  away  from  that  sort  of  dispensation  in  America, 
the  more  we  shall  feel  that  our  claims  to  freedom  and 
modern  advancement  are  being  justified.  Some  corpora- 
tions had  qualms  on  this  subject  and  engaged  in  welfare 
work  of  a  kind  that  simulated  the  old  paternal  beneficence 
of  the  factory  owner.  How  has  it  worked  out?  One 
of  those  who  have  taken  a  leading  part  in  this  form  of 
generous  effort  recently  told  me  that  his  people  are  now 
satisfied  that  their  welfare  work  was  all  wrong.  They 
are  convinced,  he  said,  that  it  would  have  been  better 
to  use  the  money  devoted  to  welfare  work  in  increasing 
wages. 

Independence  and  ability  to  look  out  for  themselves 
are  characteristics  of  the  American  workingmen  and  it 
would  be  a  sad  day  if  their  fibre  began  to  weaken  so  that 
they  should  desire  others  to  look  after  them,  whether 
it  was  by  personal  benefactions  or  by  State  or  national 
paternalism  in  their  behalf.    They  know  enough  to  real- 


INDUSTRIAL  RELATIONS  78 

ise  that  they  themselves  would  be  the  losers  by  it  in  every 
case  and  that,  as  the  French  say,  they  would  have  to  pay 
for  it  eventually  in  their  persons. 


Minimum  Wage 

The  minimum  wage  is  a  question  of  the  immediate 
future.  Mr.  Lloyd  George  has  pledged  the  British  Gov- 
ernment to  it.  In  Massachusetts  and  other  states  we 
have  had  laws  tending  to  impose  it,  but  the  war  has  in- 
terfered with  their  practical  application. 

The  French  municipal  authorities  in  Paris  and  else- 
where prescribed  minimum  wages  to  prevent  the  ex- 
ploitation of  the  women  members  of  families  whose  men 
were  at  the  front.  It  was  a  case  chiefly  of  trying  to 
foil  unscrupulous  sweatshop  masters — usually  foreigners 
— in  the  clothing,  dressmaking,  feathers,  lace  and  em- 
broidery trades.  Sums  from  five  francs  down  were  stip- 
ulated as  the  remuneration  for  certain  kinds  of  work  on 
the  basis  of  the  amount  that  could  be  done  in  a  working 
day.  The  worker,  if  underpaid  or  otherwise  mistreated, 
could  appeal  to  a  special  board. 

But  the  plan  did  not  work.  Those  who  appealed  were 
boycotted  by  the  bosses  and  the  women  generally  were 
intimidated.  There  was  not  enough  machinery  back  of 
the  municipal  law  to  assure  its  enforcement. 

In  England  the  plan  is  being  tried  of  establishing  a 
minimum  wage  with  extra  pay  for  good  work.  The 
minimum  or  basis  is  conceived  as  applying  to  workers 
who  render  service  which  is  not  above  the  average.  The 
"minimum  plus"  arrangement  implies  adequate  compen- 
sation for  above-average  service  rendered  by  the  indi- 
vidual.   The  competent  and  willing  worker  is  to  be  paid 


74  AMERICA  IN  WORLD  MARKETS 

for  all  the  service  he  gives  above  and  beyond  that  re- 
ceived from  those  who  get  the  minimum  or  basic  pay. 

The  establishing  in  all  countries  of  the  principle  of 
the  minimum  wage,  through  the  appointing  of  an  inter- 
national labor  board  to  secure  joint  action  on  the  ad- 
justment of  conditions  of  employment,  was  proposed  by 
the  British  Labor  Party.  It  would  certainly  go  far 
towards  solving  some  of  the  gravest  economic  problems 
of  the  nations  and  proving  a  powerful  influence  for 
world  peace,  if  it  could  be  put  into  effect. 

Some  British  manufacturers  have  expressed  their  op- 
position to  the  minimum  wage  project  unless  the  German 
method  of  grading  labor  is  adopted,  the  operatives  to  be 
divided  into  first,  second  and  third  class  workers  and 
minimum  w-ages  established  for  each  class.  Labor  lead- 
ers, however,  declare  themselves  unalterably  opposed 
to  any  such  practice. 


CHAPTER  X 

INFLUENCES  AGAINST  BOLSHEVISM 

Germany's  Foul  Crime — A  Typical  Russian  Nihilist 
Group — Wolfish  Leader  and  Following  of  Defectives 
— Organised  for  Sabotage  in  Industry — Waves  of 
Crime  That  Follow  War — The  True  American  Worker 
Immune — The  Remedy  of  Publicity. 

A  FOUL  crime  of  Germany's  was  the  organising 
against  the  nations  of  the  Bolshevist  movement.  The 
Russian  of  tousled  hair  and  bushy  black  beard,  with 
bombs  protruding  from  his  person,  was  regarded  by 
most  of  us  as  merely  a  comic  opera  figure.  But  he  ex- 
isted. England  and  Switzerland  gave  the  Nihilist  sanc- 
tuary. Usually  he  did  not  directly  abuse  their  hospi- 
tality. He  conspired — for  that  was  his  business — ^but 
against  other  countries. 

It  was  part  of  the  routine  of  slumming  in  the  White- 
chapel  region  of  London  twenty  odd  years  ago  for 
strangers  to  attend  a  Nihilist  gathering,  and  in  Swiss 
cities  also  the  visitor  was  generally  welcome  at  the  group 
meetings  if  he  brought  tobacco  or  money  for  the  breth- 
ren. The  "group"  generally  consisted  of  a  central  direct- 
ing figure,  of  shrewd  appearance,  the  herder  of  the  flock, 
surrounded  by  a  number  of  freaks,  male  and  female, 
"idealists"  and  brutes,  mental,  moral  and  emotional  de- 
fectives. 

Sunday  afternoons  were  the  popular  gathering  occa- 


76  AMERICA  IN  WORLD  MARKETS 

sions  for  the  Nihilists  in  the  Houndsditch  and  old  Spital- 
fields  sections  of  London.  In  a  badly-lighted,  evil-smell- 
ing garret  the  unkempt  fraternity  would  hold  meeting 
when  strangers  arrived,  seemingly  more  for  the  benefit 
of  the  latter  than  for  any  other  discernible  reason.  The 
keen  and  usually  wolfish-looking  person  in  charge  would 
designate  a  speaker  and  some  poor  blear-eyed  degener- 
ate would  arise  and  rave  and  lash  himself  into  a  frenzy 
in  a  foreign  tongue,  until  the  slumming  party  became 
gradually  nauseated  and  disgusted  and  decided  to  go, 
glad  to  donate  a  piece  of  silver  for  the  "cause,"  espe- 
cially as  by  that  means  there  was  better  prospect  of 
getting  out  to  the  fresh  air  again  unmolested. 

Who  ever  would  have  dreamed  that  a  great  nation 
would  one  day  capitalise  tlie  Russian  Nihilist,  would  one 
day  organise  such  criminals  and  madmen  as  these  for 
the  spread  of  anarchism  and  for  the  destruction  of  that 
nation's  adversaries? 

Even  before  the  war  Germany  had  begun  to  turn  them 
to  practical  account.  They  were  injected  into  the  "Syn- 
dicats"  in  France  and  the  sabotage  committed  against 
French  Government  property,  railroads  and  industrial 
plants  by  the  "Syndicalistes"  is  now  known  to  have  been 
for  the  most  part  the  work  of  Nihilists  acting  under  the 
direction  and  inspiration  of  German  Secret  Service 
agents.  France  has  not  succeeded  in  rooting  them  out. 
They  were  the  criminal  element  also  in  the  International- 
ist body,  with  headquarters  in  Berne,  which  worked  to 
such  evil  purpose  in  Belgium  before  the  war,  and  which 
during  the  war  scattered  funds  lavishly  among  the  Anar- 
chist-Socialists of  Italy,  with  results  which  at  various 
times  made  the  condition  of  Government  in  the  Penin- 
sula exceedingly  insecure. 


INFLUENCES  AGAINST  BOLSHEVISM       77 

The  grand  coup  by  Germany,  however,  was  the  financ- 
ing of  Lenine  and  Trotzky  and  the  despatching  of  them 
to  Russia  to  subvert  law  and  order  and  to  turn  anarchy 
loose.  How  well  the  emissaries  worked  need  not  here 
be  described,  nor  the  retribution  which  came  down  on 
Germany  through  the  orgy  of  crime  she  herself  had  so 
wantonly  started. 

Wars  are  usually  followed  by  "waves  of  crime."  The 
atrocious  business  of  killing  has  a  depraving  effect,  espe- 
cially on  the  morally  weak,  with  physiological  results 
which  are  fairly  well  understood.  Such  natures  do  not 
revert  promptly  to  the  modes  of  thought  and  sentiments 
of  orderly  life.  Murderous  brutality  as  it  was  taught 
to  the  German  soldier  could  only  leave  an  ulcer  not 
easily  eradicable.  The  wave  of  crime  is  intensified  where 
civic  discipline  has  broken  down,  where  social  disorder 
is  attended  by  privations  of  every  kind.  Poverty  and 
hunger  breed  the  bandit  and  the  outlaw.  Germany  taught 
the  vilest  outlaws  of  our  time  how  to  organise  and  on 
Germany  falls  the  responsibility  for  whatever  waves  of 
crime  may  follow  the  war  she  loosed  on  the  world.  She 
need  therefore  be  but  little  surprised  if  there  is  a  lack  of 
outside  sympathy  for  her  in  the  afflictions  that  beset  her 
at  home.  But  if  Bolshevism,  the  doctrine  of  the  cut- 
throat Nihilists  and  their  feeble-minded  followers, 
brought  to  Germany  a  riddle  to  solve,  it  has  brought  a 
problem  also  for  peoples  who  had  been  engaged  in  peace- 
ful pursuits  and  who  meditated  no  career  of  national 
crime. 

How  much  of  a  problem  is  it  going  to  be  for  America? 
Are  our  Socialists  turning  into  Reds  and  our  Reds  into 
Bolsheviki  and,  if  so,  how  far  is  American  patience  to 
be  stretched  ?    That  there  could  be  a  wide  seeding-ground 


78  AMERICA  IN  WORLD  MARKETS 

for  such  doctrines  in  America,  so  that  they  could  grow 
to  be  a  menace  to  our  free  institutions,  is  something  too 
preposterous  to  deserve  discussion  or  consideration. 

Bolshevism  is  the  foe  primarily  and  essentially  of  busi- 
ness and  of  business  men.  It  has  been  observed  that  the 
Reds  disregard  the  two  extremes  in  the  social  scale;  that 
they  make  no  quarrel  with  the  very  highly  placed  or  with 
the  very  lowly.  Their  war  is  against  those  in  between. 
Capital — meaning  those  engaged  in  active,  progressive, 
constructive  work,  in  the  utilising  of  human  energy  in 
industry  and  trade  and  in  the  development  of  the  civil- 
ised well-being  of  peoples — is  the  avowed  enemy. 
Towards  labor  the  Reds  profess  friendship.  They  affirm 
at  times  that  they  are  part  of  a  movement  in  which  labor 
is  an  element.  In  reality  however  the  Reds  class  skilled 
labor  in  the  same  category  as  capital.  It  also  is  the  enemy. 
Indeed  their  bitterest  assaults  have  been  made  against 
trained  workingmen,  for  they  are  fully  conscious  that 
their  appeal  can  conceivably  be  hearkened  to  only  by  the 
untrained,  the  shiftless  and  unskilled,  the  ignorant  and 
the  incompetent. 

Can  any  one  imagine  the  skilled  American  working- 
man,  who  bathes  and  shaves,  wears  clean  linen,  eats  clean 
food,  lives  in  clean  surroundings  and  has  a  high  degree 
of  education,  accepting  instruction  on  the  vital  things 
of  life  from  the  illiterate  foreigner  whose  living  condi- 
tions have  been  those  of  the  lowest  in  the  slums  of  the 
poorest  cities  of  the  world  ?  The  American  workingman 
is  ever  working  upwards.  Is  he  likely  to  listen  to  some 
mouthing  criminal  or  maniac  who  asks  him  to  help  tear 
down  the  social  fabric  that  permits  his  sons  and  daugh- 
ters to  participate  in  all  the  refinements  of  a  cultured  ex- 
istence, to  receive  high-school  and  university  training  and 


INFLUENCES  AGAINST  BOLSHEVISM       79 

to  aspire  to  the  most  exalted  positions  in  a  free  commu- 
nity? It  is  an  insult  to  the  American  workingman  to 
have  his  name  invoked  by  the  Reds. 

There  is  money  in  Bolshevism.  Lenine  and  Trotzky 
have  had  millions  at  their  disposal  and  hundreds  of  thou- 
sands of  dollars  have  been  traced  from  European  Russia 
across  Siberia  and  the  Pacific  Ocean  to  New  York  and 
other  American  cities.  And,  besides,  the  disciples  of 
Lenine  in  America  practice  systematically  the  levying  of 
tolls  on  those  who  foregather  with  them.  As  long  as 
this  condition  lasts  there  wnll  always  be  leaders  for  the 
Reds,  men  crafty  and  clever,  willing  to  take  a  risk  where 
the  stake  seems  worth  while,  men  to  whom  America  and 
American  institutions  mean  nothing,  if  not  an  opportu- 
nity to  make  money  by  attacking  them.  Whatever  the 
fool  sheep  may  be  induced  to  do,  the  wolves  who  herd  the 
sheep  are  shrewd  enough  to  keep  within  the  letter  of  the 
American  laws.  The  laws  are  not  adequate  to  meet  the 
case  of  such  treacherous  enemies  of  the  country  as  these. 
It  has  been  suggested  that  the  remedy  is  to  alter  the  laws. 
For  a  long  time  past  there  has  been  a  sentiment  in  judicial 
quarters  that  a  way  should  be  provided  of  getting  after 
the  perverted  and  unassimilable  immigrant  and  the  unde- 
sirable citizen. 

The  Reds  in  our  midst  are  in  a  well-defined  class.  In- 
variably the  directing  minds,  the  wise  ones  who  control 
the  stupid,  are  foreigners — foreigners  in  heart,  whatever 
may  be  their  status  of  citizenship.  Deportation  has  been 
suggested  as  a  remedy  for  their  case.  Of  course  the  ideal 
way  to  handle  the  undesirable  immigrant  is  to  deport 
him  from  Ellis  Island,  before  he  has  ever  had  a  chance 
to  put  a  foot  on  the  Continent.  To  try  to  get  him  out 
once  he  has  come  ashore  is  quite  another  matter.    Some 


80  AMERICA  IN  WORLD  MARKETS 

of  the  ablest  statesmen  in  America  have  expressed  the 
conviction  that  our  immigration  laws,  at  least  as  they 
have  been  applied  during  the  last  ten  or  fifteen  years, 
are  utterly  insufficient  for  the  protection  of  the  country. 
But  powerful  influences  have  steadily  shown  an  ability 
to  obstruct  any  serious  attempt  to  bring  about  reform  in 
the  immigration  laws  or  in  the  method  of  applying  them 
and  it  is  no  secret  that  there  is  a  general  belief  among 
politicians  that  any  legislator  who  undertook  to  have 
modifications  effected  in  the  immigration  laws  would  be, 
likely  soon  to  cease  to  be  a  figure  in  public  life.  So  these 
remedies  of  deportation  and  of  change  in  the  national 
laws  do  not  seem  likely  to  be  available  at  a  sufficiently 
early  date  to  allow  them  to  be  used  with  effect  against 
the  Reds. 

There  is  one  excellent  remedy,  however,  which  would 
surely  and  effectively  suit  the  case.  It  is  the  simple  one 
of  publicity.  Bolshevism,  the  conception  of  ignorance 
and  crime,  may  thrive  on  mystery  and  obscurantism,  on 
foreign  words  and  hocus-pocus.  Shown  up  in  its  naked- 
ness it  would  be  grotesque  and  ridiculous.  Tell  the 
American  people  all  about  the  Reds  and  their  "doc- 
trines" and  the  abomination  would  perish  from  our  coun- 
try. A  dose  of  publicity  would  shrivel  it  up.  American 
business  men  are  interested  in  undertaking  such  a  course 
of  publicity.  The  weaker  vessels  in  our  midst  are  nu- 
merous. It  would  not  merely  be  good  business,  it  would 
be  humanitarian  work  to  impress  on  the  less  tutored 
minds  the  viciousness  and  the  danger  of  such  un-Ameri- 
can doctrines  and  to  direct  them  with  precision  as  to  the 
course  they  should  follow  if  ever  they  should  find  them- 
selves face  to  face  with  the  enemies  of  America  and  its 
institutions. 


INFLUENCES  AGAINST  BOLSHEVISM       81 

Organised  labor  would  seem  to  have  a  special  interest 
in  promoting  on  its  own  account  such  a  campaign  of 
publicity.  Mr.  Samuel  Gompers,  president  of  the  Amer- 
ican Federation  of  Labor,  recently  declared  that  the 
Bolshevist  movement  is  causing  a  direct  injur)'  to  Ameri- 
can organised  labor.  "Bolshevism,"  he  said,  "is  as  great 
an  attempt  to  disrupt  the  trades  unions  as  it  is  to  over- 
turn the  Government  of  the  United  States."  He  added 
that  the  Reds  by  claiming  affinity  with  American  organ- 
ised labor  had  effectively  been  creating  enemies  for  the 
labor  unions.  What  better  remedy — indeed  what  other 
remedy — can  organised  labor  find  for  the  protection 
of  its  interests  and  of  its  reputation  than  frank  announce- 
ment to  the  public  of  the  exact  facts  regarding  its  own 
principles  and  its  attitude.  In  this  way  it  would  deal  a 
smashing  blow  to  the  foul  fiend  of  treason  and  anar- 
chism. 

In  the  times  through  which  we  are  passing  it  is  prob- 
able that  there  is  but  one  alternative  for  concord  be- 
tween employers  and  employees,  that  a  cat  and  dog  ex- 
istence could  not  long  continue.  The  alternative  is  an- 
archy. Bolshevism  is  an  old  thing  under  a  new  name. 
It  should  be  brought  home  to  all  the  people  what  anarchy 
means.  The  way  to  kill  it  in  the  seed  is  to  end  the  condi- 
tions on  which  it  thrives,  to  end  the  causes  of  discord  and 
discontent,  to  promote  education  and  better  living  condi- 
tions, to  show  that  whoeyer  fosters  "antagonism"  is  the 
common  enemy. 


CHAPTER  XI 

THE  DOCTRINES  OF  AMERICANISM 

Scheme  of  Existence — America's  New  Relation  to  World 
Affairs — No  Longer  in  a  Charmed  World — We  Must 
Uphold  American  Principles — No  Standing  Still — 
Government  Paternalism  as  an  Alternative, 

Control — The  Democratic  Principle — The  Foundations 
— Who  Shall  Conserve  the  Republic? — The  Politi- 
cian's Claim — That  of  the  Industrialist — The  Control 
That  Belongs  to  Labor. 

Responsibility — Power  Without  Responsibility — Need 
of  a  New  Rule — Where  Capital,  Labor  and  the 
Community  Have  Been  Delinquent — The  Case  of  the 
Newspaper. 

Scheme  of  Existence 

The  new  relation  of  America  to  world  affairs  makes 
it  necessary  for  us  henceforth  to  think  more  broadly, 
with  our  ideas  not  limited  to  our  own  country,  to  think 
internationally,  knowing  that  we  are  from  now  on  an 
integral  part  of  the  world  administration.  We  are  of 
the  international  Society  of  Nations — practically  at  the 
head  of  it.  Like  the  Spanish  influenza,  diseases  of  the 
body  politic  can  also  be  pandemic.  The  afflictions  of  our 
equals  in  civilisation  abroad  are  not  unlikely  to  become 
our  afflictions.  We  are  no  longer  in  a  charmed  world, 
isolated  from  the  struggles  and  suffering,  from  the  griefs 
and  ulcerations  of  the  old  countries  separated  from  us 
by  a  thousand  leagues  of  water. 

82 


THE  DOCTRINES  OF  AJVIERICANISM        83 

If  we  are  not  going  to  insist  on  our  own  scheme  of 
life,  on  the  principles  of  Americanism,  on  individual 
freedom  and  individual  responsibility,  on  free  play  for 
initiative  and  no  restraint  on  the  possibilities  ahead  of 
that  initiative,  if  we  are  not  going  to  keep  pushing  on- 
ward and  upward,  we  are  going  to  slide  back.  There  is 
no  standing  still.  Either  we  advance  or  we  drop  behind. 
If  we  are  going  to  allow  ourselves  to  be  pestered  with 
introspection  and  worried  about  moral,  economic  and 
social  woes  and  maladies,  real  or  imaginary,  to  the 
point  that  we  may  falter  and  grow  weary,  then  indeed 
we  should  be  ripe  and  ready  to  sink  into  the  soft  nurs- 
ing lap  of  Government  control,  passive  to  attempts  to 
put  into  actuation  public  ownership  and  all  the  vacuous, 
soul-killing,  ambition-withering  theories  of  the  idealists  to 
whom  the  idea  of  work,  real,  intensive  and  continuous, 
is  repugnant  and  to  whom  individual  freedom  and  hu- 
man self-respect  mean  Httle  or  nothing.  Then  we  should 
be  ripe  for  the  disaster  and  degradation  that  such  theo- 
ries would  inevitably  bring.  Americanism  would  cease 
to  mean  anything  to  the  nations. 

To  business — capital  and  labor  combined — belongs 
the  task  of  crushing  these  theories  under  the  heel.  Theirs, 
primarily,  is  the  duty  of  reasserting  the  American  con- 
cept of  economic  existence,  the  right  of  independent  self- 
assertion  in  conformity  with  just  and  equable  laws,  the 
untrammelled  right  to  work  honestly  and  to  progress,  the 
prerogative  of  having  an  ambitious  aim  in  life  and  of 
striving  towards  its  fulfilment.  Business  must  kick  itself 
free  from  the  trammels  that  are  being  woven  around  it, 
for  business  is  the  one  main  object  of  attack  of  all  these 
anti-American  movements.  If  business  unitedly  deter- 
mines to  force  the  maintenance  of  the  tenets  and  prin- 


84  AMERICA  IN  WORLD  MARKETS 

ciples  by  which  America  became  free  and  mighty,  a  har- 
bor for  the  oppressed  and  a  land  of  comfortable  exist- 
ence, there  will  be  no  doubt  of  America  being  able  to 
continue  her  own  superb  progress  in  civilisation  and  also 
of  being  able  to  spread  her  beneficent  helpful  influence 
throughout  the  world. 

Control 

To  this  end  it  is  essential  that  there  be  control,  rigid 
and  unflinching,  and  that  that  control  be  in  the  right 
hands.  Let  us  note  this  "control"  and  get  a  fixed 
meaning  on  it,  for  it  is  likely  to  be  much  used  by  the 
theorists  of  Government  and  by  the  subversive  agita- 
tors. 

Control  in  an  autocracy,  as  has  often  been  pointed  out, 
is  "from  above";  in  a  democracy  it  is  supposed  to  be 
"from  below,"  from  the  people,  from  the  basic  unit  of 
government,  from  the  individual  with  a  vote.  A  system 
of  government  can  endure  only  by  virtue  of  its  con- 
trol. 

During  the  war  we  were  frequently  told  that  democ- 
racy was  on  trial.  With  the  war  over,  democracy  is  on 
trial  to-day  to  a  greater  extent  than  it  ever  was.  What- 
ever the  theory,  we  know  full  well  that  there  are  democ- 
racies in  which  control  has  actually  resided,  not  in  the 
man  with  a  vote,  but  in  the  politician.  Such  democra- 
cies are  very  much  on  trial.  Problems  face  them  which 
put  the  existence  of  government,  the  maintenance  of  law 
and  order,  the  conservation  of  human  progress  and  wel- 
fare at  stake. 

How  does  the  politician  measure  up  to  the  responsi- 
bility?    Does  he  stand  as  a  bulwark  in  defence  of  the 


THE  DOCTRINES  OF  AJMERICANISM        85 

institutions  of  progress?  Is  he  a  standard-bearer,  a 
teacher  of  virile  doctrines,  an  up-lifter  of  the  body  of 
voters  whom  he  represents?  Or  is  the  poHtician  an 
opportunist  and  a  trimmer?  Is  he  a  weak  and  yielding 
support  for  his  country's  institutions,  justifying  his 
flaccid,  mollusc  conduct  in  presence  of  his  country's 
peril  by  the  plea,  "My  district  does  not  favor  strong 
action;  my  constituents  want  the  measure  which  I  know 
to  be  weak,  reactionary,  even  unpatriotic"? 

Where  is  control  to  lie  in  the  days  ahead,  which  the 
contagion  of  disorganisation  in  foreign  countries  may 
turn  into  days  of  genuine  peril?  The  forces  of  busi- 
ness, the  forces  that  are  vital  with  energy  and  with  con- 
structive ability,  the  forces  that  are  alive  to  the  impera- 
tive necessity  of  preventing  any  break  in  the  continuity 
of  civilised  progress,  are  the  forces  best  qualified  for 
control.  The  leaders  in  the  business  world  are  tested 
and  proven  leaders,  and  to  them  in  national  emergen- 
cies there  belongs  a  pre-eminent  right  to  a  bounteous 
measure  of  control.  Control  in  other  hands  has  been 
tried  and  found  wanting.  It  is  time  for  those  who  are 
equipped  for  it  and  whose  interest  in  the  safety  and  prog- 
ress of  the  republic — the  res  publica — is  so  great,  to  vin- 
dicate their  right  to  conserve  the  republic.  While  the 
politician  is  temporising — trying  to  smell  how  the  wind 
is  going  to  blow  for  him,  afraid  to  take  quick  decisive 
action  lest  it  terminate  his  career  and  his  means  of  ex- 
istence, anxious  to  curry  favor  with  any  who  may 
help  him,  even  if  they  be  those  pursuing  policies  in- 
imical to  the  nation's  welfare — the  props  of  national 
control  may  be  undergoing  a  sapping  process,  so  that 
the  whole  edifice  of  government  may  be  resting  on  sup- 
ports that  will  not  stand  the  strain  if  a  day  of  crisis 


86  AMERICA  IN  WORLD  MARKETS 

comes  when  the  forces  of  destruction  put  forth  a  com- 
bined and  mighty  effort  to  pull  it  down.  In  times  like 
these  the  politician  is  but  a  feeble  reed.  The  pillars  of 
steel  and  granite  are  the  robust  forces  on  which  the  na- 
tion's strength  has  been  built  up,  the  doers  and  the  pro- 
ducers, the  designers  and  the  workers.  To  them  belongs 
not  merely  the  privilege  of  saving  the  nation  in  the  hour 
of  peril,  but  also  of  upholding  it  against  the  day  of  evil. 
In  a  more  restricted  way  consideration  may  be  taken 
of  control  in  the  nation's  industrial  life.  Insidious  doc- 
trines abound  on  the  subject.  Labor  learns  from  the 
flattering  politician  that  to  it  belongs  control.  To  labor 
indubitably  belongs  control  of  itself.  If  others — be  they 
labor  leaders  or  politicians — assume  to  take  over  the 
rights  of  labor  in  this  regard  and  arrogate  to  them- 
selves the  prerogative  of  infringing  on  the  measure  of 
control  to  which  other  elements  in  the  nation  are  justly 
entitled,  there  arises  a  condition  of  danger  that  demands 
a  vigorous  assertion  of  rights  on  the  part  of  these  others. 

Responsibility 

Power  without  responsibility  is  a  prime  source  of 
evil,  of  disorganisation  and  of  useless  waste  of  effort  in 
a  new  country  like  ours  where  development  has  been 
in  progress  on  so  prodigious  a  scale.  The  time  has  come 
to  inculcate  a  sense  of  responsibility,  to  decide  on  ways 
of  enforcing  its  obligations.  Business  and  those  whom 
business  serves  must  come  to  realise  their  mutual  respon- 
sibility. 

Roughly  speaking  we  may  for  this  purpose  consider 
the  two  elements  of  business,  capital  and  labor  and  "the 
community,"  the  community  being  all  who  are  not  part 


THE  DOCTRINES  OF  AMERICANISM        87 

of  a  particular  industry  or  commercial  enterprise,  or 
group  of  them,  momentarily  under  consideration  with 
regard  to  responsibility. 

The  sins  of  capital  and  labor  jointly  through  lack  of 
concern  for  the  community,  in  strikes  and  contentions 
and  disregard  of  the  duty  of  service,  have  been  patent 
and  flagrant  in  industries  at  various  times  and  places. 

Capital  separately — that  is  of  course  certain  unworthy 
representatives  of  it — has  often  abused  the  public  trust. 
And  obviously  there  is  no  monopoly  of  delinquency  in 
any  one  industry.  It  has  been  discernible  even  in  the 
publishing  industry,  and  more  particularly  in  the  news- 
paper branch.  There  capital,  as  in  other  American  in- 
dustries, has  as  a  rule  guided  itself  by  highly  honor- 
able ethical  principles,  but  power  without  responsibility 
as  it  exists  in  the  case  of  the  newspaper  can  constitute, 
as  experience  has  shown,  a  very  serious  menace,  and 
while  the  lapses  from  the  rule  of  honor  are  all  the  more 
notable  as  they  are  so  exceptional,  they  are  all  the  more 
grievous  as  they  can  lead  to  atrocious  wrongs  to  busi- 
ness and  to  the  whole  community.  Corruptio  opthni 
pessima. 

Labor,  or  rather  "labor  leaders,"  have  often  shown 
marked  contempt  for  communal  obligations.  Many 
persons  see  an  absence  of  the  due  sense  of  responsibility 
in  the  proposal  of  labor  leaders  that  the  community  buy 
the  railroads  and  turn  them  over,  nominally  to  labor,  in 
all  apparent  probability  to  labor  leaders,  to  be  run  prac- 
tically at  their  own  discretion.  It  is  proposed  that  the 
Government  advance  the  money.  But  the  Government, 
as  such,  has  no  money.  What  it  raises  belongs  to  and 
must  come  from  the  people. 

The  community,  through  its  representatives — the  leg- 


88  AMERICA  IN  WORLD  MARKETS 

islative,  judicial  and  executive  powers,  has  sinned  also, 
grievously  and  often,  against  business.  The  general 
public  may  be  shocked  at  having  responsibility  brought 
to  its  door  for  the  faults  and  failures  of  legislators  and 
functionaries  and  for  neglect  to  realise  that  the  latter 
are  its  representatives  and  should  be  held  to  strict  ac- 
countability. 

In  last  analysis  the  whole  community  is  interested  in 
business,  is  part  of  business  or  is  dependent  on  it,  from 
the  industrialist,  to  the  professional  man,  to  the  func- 
tionary and  on  down  to  the  demagogue  and  the  politi- 
cian and  those  who  live  by  their  wits.  The  searching  of 
conscience  in  entering  the  new  phase  of  affairs  will  be 
vain  and  the  putting  of  the  nation's  house  in  order  will 
not  properly  begin  until  measures  are  taken  to  set  up 
the  rule  of  responsibility  and  until  power  without  respon- 
sibility ceases  to  exist. 


CHAPTER  XII 

statesmen's  judgments 

Secretary  Lane's  Views  and  Projects — Confidence  in  the 
American  People — The  Get-Together  Habit — Disposi- 
tion of  the  Administration  to  Co-operate  in  Solving 
Business  Problems. 

Commerce  Department  Plans — Statement  by  Secretary 
Redfield — Aid  for  Industry — Bureau  of  Standards — 
Bureau  of  Foreign  and  Domestic  Commerce — Conser- 
vation Division. 

Mr.  Lloyd  George  on  the  Changed  Conditions — The  Rule 
for  Success — Rights  of  Capital  and  Labor — Both 
Must  Receive  Increased  Recognition. 

Secretary  Lanefs  Views  and  Projects 

Thoroughly  optimistic  regarding  the  continued  pros- 
perity of  the  United  States  and  regarding  the  wholesome 
democratic  policies  of  its  governing  powers  is  Mr.  Frank- 
lin K,  Lane,  Secretary  of  the  Interior,  with  whom  I  have 
discussed  the  "problems,"  theories  and  forecasts  that  are 
to  such  an  unusual  extent  agitating  men's  minds  now 
that  the  war  is  over,  and  from  whom  I  have  sought  an 
expression  of  authoritative  opinion  on  the  prospective 
policy  of  the  Administration  with  regard  to  industry 
and  commerce  in  the  new  era.  His  views  are  expressed 
in  the  following  authorised  resume. 

Secretary  Lane  deprecates  forecasts  regarding  social 
or  economic  upheavals  as  an  offence  against  the  good 
sense  and  staunch  character  of  the  American  people, 

89 


90  AMERICA  IN  WORLD  MARKETS 

That  people's  marvellous  capacity  for  adaptability  to  new 
conditions,  for  ability  to  handle  new  problems  of  the 
gravest  character,  was  shown  when  it  was  suddenly  con- 
fronted, he  says,  with  a  colossal  war  effort  for  which  it 
was  practically  without  preparation.  It  was  the  source 
of  the  veritable  miracle  which  America  performed  in  the 
war.  That  same  capacity  may  be  counted  on  to  work 
more  such  wonders  in  the  new  era. 

Nor  does  Secretary  Lane  admit  that  there  is  any  jus- 
tification for  the  forecast  that  this  country  is  drifting 
toward  any  radical  form  of  Government  paternalism. 
Heaven  forbid  that  it  should,  he  declares.  The  Bolshe- 
viki,  and  those  who  have  lived  where  life  was  miserable 
and  without  contentment  or  satisfaction,  may  sigh  for 
Socialism,  for  a  new  theory  of  communal  life.  America 
wants  none  of  the  new  theory.  It  has  its  own  established 
mode  of  existence,  at  the  root  of  which  is  independence 
and  individual  initiative,  and  it  is  not  going  to  barter  its 
glorious  heirloom  for  any  new  theory  which  would  nar- 
row and  stifle  individual  effort.  We  have  seen  a  hor- 
rid example  in  State  paternalism  in  Germany,  where  a 
whole  people  was  cast  in  a  debased  mold,  fashioned  by 
an  autocratic  government. 

On  the  other  hand,  however,  it  is  quite  true,  Secretary 
Lane  agrees,  that  the  war  has  effected  important  changes 
in  the  outlook  on  life  and  in  the  conduct  of  the  Ameri- 
can people.  The  most  notable  change,  he  says,  is  the 
very  desirable  one  that  we  have  been  developing  a 
broader  communal  sense.  We  are  showing  a  diminu- 
tion of  extreme  individualism  and  a  striking  increase  of 
co-operation  with  one  another.  Keeping  this  fact  in 
mind,  we  can  feel  reassured  with  regard  to  our  ability 
to  solve  the  problems  that  are  ahead. 


STATESMEN'S  JUDGMENTS  91 

Questions  touching  the  speeding-up  of  our  industries 
for  peace  work;  the  control  and  distribution  of  raw 
materials;  the  determination  of  commodity  prices;  aid 
for  the  development  of  new  industries ;  protection  for  in- 
dustries that  have  grown  up  as  a  result  of  the  war;  the 
development  or  restriction  of  industrial  combinations; 
the  harmonising  of  the  interests  of  capital  and  labor — 
all  these,  and  a  thousand  others,  should  cease  to  be  a 
source  of  serious  worry  if  we  reflect  that  the  growing 
spirit  of  co-operation  has  been  preparing  the  way  for 
their  solution  on  common-sense  lines  and  has  also  ac- 
customed us  to  look  to  the  Government  for  guidance 
and  direction  and  for  a  sympathetic  appreciation  of  our 
difficulties,  and  to  confide  in  it  to  furnish  such  help  and 
assistance  as  will  be  of  benefit,  and  as  can  be  given  with- 
out derogating  from  the  principle  of  the  individual's  own 
responsibility. 

It  is  the  Government's  view  that  a  due  measure  of  the 
burden  must  rest  on  the  individual  and  that  all  his  fac- 
ulties must  be  challenged  to  carry  it.  But  we  have  seen 
that,  in  the  emergency  of  war,  emergency  measures  have 
been  adopted  to  meet  the  critical  needs.  Special  machin- 
ery for  this  purpose  was  created  during  the  war  and 
could  be  retained  or  could  be  created  again  for  peace 
needs.  The  Government  will  be  no  less  willing  to  adopt 
emergency  measures  to  meet  the  special  needs  of  the  new 
period.  When  the  food  question  became  disquieting, 
prompt  action  was  taken  to  fix  the  price  of  wheat,  to  in- 
dicate the  grade  of  bread  to  be  eaten,  to  bar  the  use  of 
meat  and  wheat  on  certain  days,  to  insure  a  wiser  policy 
in  the  more  general  use  of  more  available,  more  perish- 
able, and  less  essential  foodstuffs,  so  that  our  armies  and 
those  of  our  associates  in  the  war  should  not  lack  the  es- 


92  AMERICA  IN  WORLD  MARKETS 

sentials.  Steel  and  copper  and  other  metals  were  like- 
wise rationed  to  the  less  essential  industries.  And  so  for 
transportation  and  commercial  supplies  and  trading  fa- 
cilities generally. 

We  may  rest  confident  that  we  shall  be  able  in  peace 
times  to  cope  with  any  emergency  that  presents  itself ;  that 
we  shall  know  when  to  put  special  measures  into  force 
and  that  we  shall  know  when  and  how  to  drop  them  the 
moment  the  emergency  passes. 

Socialism  grow?  and  waxes  strong,  where,  back  of  the 
individual's  effort,  there  is  no  conscience.  But  where,  as 
in  the  broad  spirit  of  co-operation  and  of  personal  re- 
sponsibility to  the  community  which  the  war  has  fos- 
tered among  us,  when  the  man  in  business  has  come  to 
feel  and  to  act  as  if  he  were  managing  a  public  utility, 
and  to  deal  with  the  public  on  that  basis,  he  will  assuredly 
not  be  an  object  of  molestation,  and  the  Government  will 
not  dream  of  setting  up  opposition  to  him  or  confronting 
him  with  enforced  competition. 

The  American  people  have  a  large  generous  standard 
and  their  whole  scheme  of  life  is  free.  Hereafter  they 
will  have  less  patience  with  any  system  or  policy  which 
tends  to  dwarf  personal  initiative.  The  speed  we  have 
made  in  the  war,  the  almost  impossible  things  which 
we  have  accomplished,  have  impressed  on  the  minds  of 
all  Americans  the  advantages  that  come  from  freedom 
of  enterprise. 

It  is  because  our  system  has  educated  the  people  to  be 
quick  in  resource,  adaptable  in  the  hour  of  crisis,  that 
we  have  done  the  things  that  many  thought  could  not 
be  done,  the  great  achievements  of  this  war  in  which  we 
may  take  a  just  pride.  The  whole  nation  buckled  down 
to  the  work.     Men  of  large  affairs  were  entrusted  with 


STATESMEN'S  JUDGMENTS  93 

the  handling  of  the  big  enterprises  of  the  war.  The  spirit 
of  co-operation  manifested  itself.  The  United  States 
worked  as  a  unit ;  and  so  great  things  were  done.  Is  it 
any  wonder  that  we  are  well  satisfied  with  our  own 
scheme  of  national  policy,  in  which  the  individual  is 
free  and  his  expansion  and  emergence  is  not  only  made 
possible,  but  receives  every  encouragement,  while  at  the 
same  time  we  continue  well  aware  of  the  great  advan- 
tages that  accrue  from  voluntary  co-operation? 

With  notable  prevision  Secretary  Lane  had  taken  up 
well  in  advance  the  question  of  providing  for  the  demo- 
bilised soldiers,  of  fulfilling  the  Nation's  duty  toward 
those  who  had  served  it  and  of  obviating  the  danger  of 
serious  disturbance  in  the  labor  market.  His  plans  in 
this  regard,  which,  as  elsewhere  described,  include  the 
reclamation  of  waste  lands,  the  creation  of  community 
centres  and  the  turning  over,  on  easy  terms  of  payment, 
of  farms,  dwellings  and  equipment  to  the  soldiers  who 
made  the  farms  and  built  the  dwellings,  are  being  worked 
out  and  promise  notable  benefit  to  the  whole  country 
when  money  and  authority  shall  have  been  received  from 
Congress  for  their  actuation. 

As  for  the  other  problems,  he  said  the  present  tem- 
per of  the  American  people  is  that  whatever  is  needed  to 
be  done  will  be  done.  If  it  is  a  case,  for  instance,  of 
meeting  a  problem  of  unemployment  that  might  arise 
temporarily  in  the  possible  confusion  of  shifting  indus- 
try back  over  to  peace  conditions,  public  works  and  im- 
provements can  be  undertaken — road-making,  street  re- 
pairing, construction  of  public  buildings  and  transporta- 
tion lines,  and  the  like.  Public  utilities  work  can  be 
started,  even  in  advance  of  its  being  needed,  in  order  to 
relieve  the  passing  disturbance  of  labor  conditions. 


94  AMERICA  IN  WORLD  MARKETS 

Were  it  the  case  that  manufacturers,  in  any  consider- 
able body,  needed  help  in  getting  back  to  their  peace 
stride,  why  again  special  work  could  be  allotted,  or  other 
ways  and  means  found  to  meet  that  case  also. 

New  industries  may  need  nursing  care  and  protection. 
If  so,  tariff  laws  and  other  expedients  can  be  invoked 
to  promote  that  end.  We  are  certainly  not  going  to  be 
guilty  of  any  criminal  economic  folly  such  as  allowing 
our  new  dyes  and  chemicals  industries,  for  instance, 
to  be  smothered  and  swamped  by  a  hostile  alien. 

And  based  on  similar  ideas  and  principles  must  be  the 
answers  to  the  questions  that  are  being  raised  regarding 
our  mercantile  marine  and  the  possibility  of  the  large 
amount  of  merchant  tonnage  we  may  soon  have  being 
idle  for  lack  of  cargoes  contracted  for  in  advance,  or  for 
lack  of  foreign  commerce  to  keep  it  busy.  The  Gov- 
ernment again  can  take  action  or  can  recommend  meas- 
ures to  be  adopted  to  meet  an  awkward  situation. 

But  in  this  very  connection  it  may  be  pointed  out  that 
forecasts,  and  more  or  less  gloomy  prognostications  re- 
garding problems  to  come,  are  not  always  based  on  ac- 
curate premises.  Thus  there  is  already  reason  to  be- 
lieve that  there  will  be  a  demand  on  the  part  of  ship- 
ping companies,  as  purchasers,  for  all  or  part  of  the 
merchant  shipping  which  the  Government  has  construct- 
ed or  is  now  constructing,  so  that  in  reality  there  is  no 
positive  prospect  of  the  Government  finding  itself  with 
anything  like  a  white  elephant  on  its  hands  in  the  way 
of  cargo  tonnage  for  which  it  has  no  immediate  use. 

Who  shall  claim  also  the  right  of  prophecy  regarding 
wage  and  salary  movements  and  the  rise  or  fall  in  the 
cost  of  the  necessities  of  hfe?  There  are  assertions  to 
the  effect  that  the  workingman's  wages  will  have  to  be 


STATESMEN'S  JUDGMENTS  95 

smaller  and  Government  action  will  be  demanded  to 
force  down  the  cost  of  living  expenses.  How  can  any 
one  speak  positively  in  a  matter  of  this  kind  ? 

It  is  intimated  also  that  habits  of  thrift  and  of  self- 
denial  have  been  inculcated  during  the  war  and  that  they 
will  continue,  to  the  detriment  of  the  luxury  or  non- 
essential industries.  If  this  is  so,  it  certainly  cannot  be 
proved  by  the  fact  that  last  year  more  jewelry  was  bought 
in  the  United  States  than  ever  before  in  one  year.  The 
fact  is  that  even  with  the  high  wages  there  has  been  no 
evidence  of  any  exceptional  saving.  It  is  highly  prob- 
able that  their  purchases  of  Liberty  Bonds  and  of  War 
Savings  Stamps  represent  practically  all  the  saving  that 
the  workers  have  effected  »in  the  unusual  period. 

The  old  law  of  supply  and  demand  with  regard  to 
capital  and  labor  may  be  counted  on  to  hold  good.  La- 
bor will  adjust  itself  to  such  new  conditions  as  may 
arise,  just  as  capital  will  adjust  itself.  The  one  impor- 
tant tendency  of  our  internal  development  worth  keeping 
in  mind  is  the  fact  that  we  are  working  more  and  more 
in  co-operation;  we  are  gaining  the  habit  of  acting  as  a 
unit,  capital  and  labor  are  being  more  and  more  fused 
into  one  whole.  In  greater  union  within  the  fold  of  in- 
dustry Secretary  Lane  sees  the  chief  safeguard  against 
the  forces  of  disruption. 

As  the  Sixty-fifth  Congress  failed  to  act  on  the  re- 
construction legislation  which  he  advocated,  Mr.  Lane 
announced  that  he  would  press  for  action  on  it  in  the 
next  Congress.     He  said : 

"Congress  adjourned  without  passing  any  of  these  im- 
portant national  bills  which  I  have  been  urging: 

"i.  The  appropriation  of  $100,000,000  for  providing 
farms  for  returned  soldiers  upon  our  unused  lands.  This 


96  AMERICA  IN  WORLD  MARKETS 

measure  was  reported  in  both  houses,  but  never  came  to 
a  vote.  I  will  press  it  at  the  next  session  of  Congress. 
Twenty  thousand  soldiers  and  sailors  have  written  to 
me  supporting  it. 

"2.  The  Smith-Bankhead  Americanisation  bill  pro- 
viding a  method  by  which  we  can  overcome  illiteracy  in 
the  United  States  and  give  our  8,000,000  illiterates  an 
opportunity  to  read  the  newspapers  and  the  Constitution 
of  the  United  States,  so  that  they  may  not  be  dependent 
upon  what  they  are  told  by  those  who  may  be  hostile  to 
the  welfare  of  the  country.  This  bill  will  be  brought  up 
for  passage  when  Congress  next  meets. 

"3.  A  measure  providing  for  the  survey  of  the  power 
resources  of  the  East  as  well  as  the  West,  that  our  rail- 
roads, industries,  and  cities  may  conserve  fuel. 

"4.  The  General  Leasing  bill  under  which  withdrawn 
coal,  oil,  phosphate,  and  sodium  lands  would  be  opened 
for  development  under  a  leasing  system,  which  has  been 
before  Congress  for  five  years,  and  for  which  there  is  a 
strong  majority  in  both  houses,  as  shown  by  the  fact 
that  a  similar  bill  has  passed  each  house  three  times. 

"5.  The  Water  Power  bill,  which  will  permit  the  use 
of  water  now  running  to  waste  in  our  rivers  and  induce 
immediate  investment  in  over  twenty  States  in  the  con- 
struction of  hydro-electric  plants." 

Commerce  Department  Plans 

A  statement  in  brief  of  the  way  in  which  the  Depart- 
ment of  Commerce  is  planning  to  work  for,  and  in  co- 
operation with,  American  industry  in  the  new  era,  was 
communicated  to  me  in  the  following  letter  by  Secretary 
Redfield : 


STATESMEN'S  JUDGIVIENTS  97 

DEPARTMENT  OF  COMMERCE 
Office  of  the  Secretary 
My  dear  Sir: 

It  is  the  earnest  wish  of  the  Department  of  Commerce  to  help 
our  industries  in  every  practicable  way.  It  was  created  for  that 
purpose.  Hitherto  it  has  been  able  in  the  foreign  field  and  in 
that  of  scientific  research  to  be  of  much  service  to  American 
business.  The  time  seems  ripe  to  enlarge  that  service  in  the 
domestic  field  by  maintaining  the  touch  with  industry  that  the 
War  Industries  Board  has  had,  and  through  that  developing 
helpful  relations  between  the  Government  and  industry,  to  their 
mutual  good. 

We  shall  continue  the  work  of  the  Conservation  Division, 
that  of  industrial  standardisation  of  the  War  Industries  Board, 
as  well  as  the  reclamation  work  and  the  work  of  the  special 
committee  on  cotton  baling  and  transportation,  allied  with  the 
storage  committee  of  that  board.  The  fifteen  gentlemen  who 
have  been  the  heads  of  divisions  of  that  board  have  been  asked 
to  serve  as  unofficial  advisers  in  this  department  in  connection 
with  the  same  industries.  We  hope,  in  this  way,  to  maintain 
the  touch  of  the  industries  with  the  Government  on  a  friendly 
co-operative  basis  and  to  help  them  do  away  with  industrial 
wastes,  with  objectionable  trade  practices,  with  unnecessary 
and  costly,  needless  styles  and  varieties  of  goods,  and,  through 
the  Bureau  of  Standards,  to  co-operate  in  the  working  out  of 
scientific  problems.  This  in  addition  to  the  propaganda  abroad 
for  which  work  we  are  asking  largely  increased  appropriations 
from  Congress. 

The  records  of  the  War  Industries  Board  relating  to  industry 
in  general  and  the  above  matters  will  in  due  time  be  taken 
over  by  us,  as  will  those  of  the  War  Trade  Board  when  the 
latter  body  shall  cease  its  functions. 

There  are  three  distinct  phases  in  which  the  Department  of 
Commerce  will  take  an  active  part  in  connection  with  the  gen- 
eral commerce  of  the  country  henceforth.     They  are: 

(i)  The  scientific  phase,  through  the  Bureau  of  Standards. 
We  shall  welcome  the  opportunity  to  put  the  large  research 
and  experimental  facilities  of  the  Bureau  of  Standards  at  the 
disposal  of  industry,  inviting  the  manufacturers  to  send  their 
technical  men  to  us  and  we,  in  turn,  going  to  them  that  in  as 
close  association  as  possible  with  industries  on  the  scientific 
side  we  may  bring  to  our  factories  authoritative  knowledge. 


98  AMERICA  IN  WORLD  MARKETS 

(2)  Through  the  Bureau  of  Foreign  and  Domestic  Com- 
merce— promotive  work  abroad  by  means  of  our  own  foreign, 
resident  and  travelling  staff,  coupled  with  the  obtaining  of 
information  abroad,  including  the  vast  mass  of  information 
already  filed  and  available  and  the  making  of  special  studies 
and  inquiries  where  that  is  necessary.  This  would  include  in- 
formation respecting  foreign  tariffs,  trade-marks,  patents,  prac- 
tices, etc.,  etc. 

(3)  Through  the  new  arrangements  just  concluded  for  tak- 
ing over  the  work  of  the  Conservation  Division  of  the  War 
Industries  Board :  The  work  of  commercial  standardisation,  the 
saving  of  industrial  wastes,  the  removing  of  hurtful  business 
practices,  including  the  co-operative  study  with  a  committee 
of  the  industries  through  their  representative  advisers  of 
methods  to  improve  the  effectiveness  of  the  industries  as  a 
whole. 

William  C.  Redfield, 
Secretary. 

The  Industrial  Board,  organised  in  March,  1919, 
within  the  Department  of  Commerce,  to  study  and  advise 
on  measures  for  faciHtating  the  adjustment  of  business 
to  new  conditions,  announced  as  one  of  its  principal  aims 
the  bill  to  authorise  purchase  by  the  Government  of 
business  might  be  avoided  and  "the  law  of  supply  and 
demand  helped  over  the  gap  between  holdover  war  prices 
and  a  stable  level." 

In  setting  forth  its  purposes  the  Industrial  Board 
further  stated: 

"Basic  commodities  such  as  steel,  building  materials, 
textiles  and  food  will  be  considered  first  and  brought  to 
a  staple  basis.  The  governmental  policy,  as  expressed  by 
the  bill  to  authorise  purchase  by  the  Government  of 
wheat  at  the  guaranteed  price  and  resale  of  it  at  the  world 
price,  is  to  assist  in  bringing  prices  of  basic  commodities 
to  normality  by  bringing  down  the  cost  of  living.  It  is 
hoped  that  these  steps  alone  will  automatically  operate  to 


STATESMEN'S  JUDGMENTS  99 

reduce  the  price  of  fabricated  articles.  If  they  do  not  do 
so  in  any  particular  case,  the  industry  affected  will  be  in- 
vited into  conference. 

"As  soon  as  a  stable  and  wholesome  scale  of  prices 
is  achieved  the  cost  of  living  will  have  so  far  been  re- 
duced as  to  create  automatically  reductions  in  the  price 
of  labor  without  interfering  with  American  standards 
and  ideals  for  the  treatment  and  living  conditions  of 
labor,  and  thus  the  last  inflating  element  will  have  been 
withdrawn  from  prices.  It  is  believed  that  industry  will 
agree  that  the  cost  of  living  must  be  substantially  re- 
duced before  labor  should  be  expected  to  accept  lower 
wages,  and  thus  industry  should  stand  the  first  shock  of 
readjustment. 

"The  assurance  to  the  country  of  a  market  stabilised  at 
the  lowest  reasonably  expected  level  will  loose  such  a 
flood  of  buying  for  the  re-creation  of  stocks,  the  making 
up  of  arrears  in  the  building  programme,  the  feeding  of 
needs  long  starved  by  economy  and  the  inversion  of  world 
markets  as  may  stand  unprecedented  in  this  country. 
From  the  stable  level  thus  reached  by  co-operation  we 
may  expect  a  healthy  and  normal  condition  created  by 
the  complete  and  unhampered  operation  of  the  law  of 
supply  and  demand." 

Mr.  Lloyd  George  on  the  Changed  Conditions 

Abroad  there  is  a  keen  realisation  of  an  entirely  new 
condition,  of  the  change  coming  over  the  whole  face  of 
existence,  of  the  fact  that  business — capital  and  labor — 
is  henceforth  to  be  the  factor  meriting  supreme  consid- 
eration, that  industrial  relations,  the  relations  of  manu- 
facturers, merchants  and  workers,  will  be  the  pivot  of 


100         AMERICA  IN  WORLD  MARKETS 

the  nation's  success  or  failure.  Mr.  Bonar  Law  said, 
after  hostilities  had  ceased,  "The  prosperity  of  the  Brit- 
ish Empire  now  depends  on  capital  and  labor  working 
together." 

Mr.  Lloyd  George,  the  British  Premier,  has  called  for 
national  unity  during  reconstruction  and  has  issued 
warning  that  in  dealing  with  economic,  social  and  finan- 
cial problems,  there  must  be  a  new  spirit  of  co-opera- 
tion. "We  must  face  all  these  questions,"  he  declared, 
"with  new  eyes  and  without  regard  to  pre-war  views."  In 
an  election  address  he  said : 

"There  is  one  condition  for  the  success  of  all  efforts 
to  increase  the  output  of  this  country — confidence.  .  .  . 
You  must  give  confidence  to  all  classes,  confidence  to 
those  who  have  brains,  to  those  who  have  capital,  and  to 
those  with  hearts  and  hands  to  work.  I  say  to  labor: 
You  shall  have  justice;  you  shall  have  fair  treatment, 
a  fair  share  of  the  amenities  of  life,  and  your  children 
shall  have  equal  opportunities  with  the  children  of  the 
rich.  To  capital  I  say:  You  shall  not  be  plundered  or 
penalised ;  do  your  duty  by  those  who  work  for  you,  and 
the  future  is  free  for  all  the  enterprise  or  audacity  you 
can  give  us.  But  there  must  be  an  equal  justice.  La- 
bor must  have  happiness  in  its  heart.  We  shall  put  up 
with  no  sweating.  Labor  is  to  have  its  just  reward. 
And  when  the  whole  world  sees  that  wealth  lies  in  pro- 
duction, that  production  can  be  enormously  increased, 
with  higher  wages  and  shorter  hours,  and  when  the 
classes  feel  confidence  in  each  other,  and  trust  each  other, 
there  will  be  abundance  to  requite  the  toil  and  gladden 
the  hearts  of  all.  We  can  change  the  whole  face  of  ex- 
istence." 


PART  II 
THE  SCIENTIFIC  METHOD  IN  COMMERCE 

CHAPTER  I 

FOR  A  NEW  MORAL  CODE 

Men's  Sensibilities  Dulled  by  Revelations — German  "Sci- 
ence" of  Commercial  Expansion — Others  Have  Stud- 
ied in  Same  School — Prospect  of  Germany  "Coming 
Back" — Her  Real  Purpose  in  Bringing  America  Into 
the  War — German  Business  Men  to  Lead  Govern- 
ment— Frightfulness  in  Commerce — No  Sign  of 
Change  of  Heart. 

The  heart  of  mankind  became  calloused  under  the 
constantly  recurring  shock  of  the  news  of  war  atrocities 
and  of  calamities  to  human  beings  that  stunned  and  dead- 
ened sensibility.  There  is  no  doubt  that  there  has  been 
a  dulling  also  of  the  fine  moral  fibre  that  elevated  busi- 
ness principles  throughout  the  world,  as  a  result  of  the 
revelations  of  unscrupulousness,  treachery  and  unfairness 
in  the  business  dealings  of  one  nation  with  others.  A 
genuine  problem  of  reconstruction  that  faces  the  United 
States  is  the  revitalising  of  that  fine  moral  fibre  through- 
out the  world. 

As  in  warfare  upright  belligerents  see  themselves 
forced  to  make  reprisals,  to  imitate  degrading  methods 
in  order  to  defend  themselves  against  the  barbarian  who 

lOI 


10«  AMERICA  IN  WORLD  MARKETS 

is  limited  by  no  sense  of  principle,  so  in  the  business 
world  there  is  always  the  danger  that  the  man  of  prin- 
ciple may  be  forced  in  self-protection  to  retaliate  with 
some  of  the  measures  of  the  unprincipled,  with  the  re- 
sult that  the  whole  scheme  of  business  suffers  a  degra- 
dation. If  we  are  to  reinstate  throughout  the  world 
American  ideals  of  honor,  fair  play  and  generous  deal- 
ing in  business,  we  must  first  dissect  in  detail  the  new 
body  of  business  methods  which  the  unscrupulous  have 
gradually  been  imposing  on  the  world. 

Germany,  in  following  her  studied  plan  for  the  con- 
quest of  the  world,  developed  the  "science"  of  commer- 
cial domination.  Were  it  not  for  the  ignoble  methods 
often  employed,  we  might  say  she  had  made  of  commerce 
a  fine  art.  She  had  assumed  mastery  in  it.  Her  kultur, 
progressive  efficiency,  was  represented  notably  in  com- 
merce. 

Psychology  and  the  study  of  human  traits  in  the  va- 
rious lands  of  the  earth  were  no  less  a  feature  of  her 
scientific  study  than  were  geography  and  all  the  con- 
crete details  regarding  markets  and  merchants  and  mer- 
chandising. It  would  be  vain  to  deride  or  minimise  the 
importance  of  the  German  work  and  methods  in  this  re- 
gard. They  have  made  their  impress  on  other  peoples. 
Other  countries  of  Europe  have  studied  the  science  of 
business  in  the  temples  of  Germany.  Germany  might 
cease  to  exist  as  a  state  and  as  a  power,  and  yet  the 
German  scientific  methods  of  business  would  march  on. 
They  will  march  on  and  they  will  be  intensified,  and 
there  is  no  question  but  that  the  commerce  of  the  world 
will  thereby  be  lowered  in  moral  tone,  unless  action  is 
taken  by  the  free  peoples  with  upright  ideals  to  bring 
into  disrepute  that  "science"  of  commercial  trading  which 


FOR  A  NEW  MORAL  CODE  103 

implies  disregard  for  the  rights  and  feelings  of  others 
and  repudiation  of  the  most  honorable  traditions  gov- 
erning intercourse  between  men. 

To  know  the  evil  in  its  intimate  facts,  it  is  important 
to  reveal  the  methods  resorted  to  by  Germany  to  build 
up  in  brief  time  her  huge  fabric  of  commerce  and  of 
power  in  foreign  countries.  There  need  be  no  disposi- 
tion to  add  to  the  burden  of  woe  and  of  universal  odium 
which  Germany  has  brought  upon  herself.  But  on  the 
other  hand  any  false  sentiment  in  that  regard  would  be 
entirely  misplaced  if  it  prevented  the  publication  of  facts 
of  which  the  business  men  in  a  country  like  ours  should 
be  informed  so  that  they  may  know  the  dangers  they 
face  and  so  that  they  may  study  measures  to  overcome 
them.  To  Germany  herself,  and  to  nations  that  have 
shown  an  inclination  to  follow  the  German  lead  in  this 
regard,  t^ere  will  have  been  rendered  a  distinct  service 
by  the  r-ropagating  of  this  knowledge  throughout  the 
world,  if  the  result  will  be  to  force  them  back  to  the 
paths  of  honor  and  integrity  which  the  leading  nations 
of  the  world  have  followed  in  their  business  relations. 
Not  indeed  that  this  would  be  a  very  good  and  sufficient 
reason  for  making  such  publication,  as  there  is  no  in- 
dication of  a  contrite  or  penitential  spirit  on  the  part  of 
Germany  with  regard  to  her  business  crimes  any  more 
than  with  regard  to  her  murderous  atrocities  in  warfare. 

Germany,  as  a  matter  of  fact,  is  far  from  being  over- 
whelmed and  crushed  to  earth,  either  in  a  military  or 
commercial  way.  There  is  no  doubt  that  she  will  "come 
back."  She  is  probably  in  better  shape  economically  than 
most  of  her  European  adversaries.  She  still  has  a  huge 
stake  in  foreign  countries  and  in  world  markets.  She  had 
foreseen  and  prepared  for  the  possibility  of  defeat  in  the 


104  AMERICA  IN  WORLD  MARKETS 

field.  The  world  has  been  surprised  that  in  true  military 
pride  she  showed  herself  entirely  lacking.  She  seemed 
willing  to  be  not  merely  beaten  but  disgraced.  The  French, 
after  the  loss  of  many  a  conflict  in  their  long  history 
of  warfare  were  always  able  to  say  "All  is  lost  except 
honor/' — "Tout  est  perdu,  fors  I'honneur."  In  the 
German  case  it  can  be  said  that  "All  was  lost,  even  hon- 
or"— "Tout  fut  perdu,  meme  I'honneur." 

The  Germans,  of  course,  do  not  look  at  it  in  that  light. 
When  the  possibility  of  losing  the  war  had  been  laid  be- 
fore them,  they  were  always  assured  that  there  was  an- 
other war  in  which  they  would  not  lose — the  business 
war,  der  Wirtschafts-Krieg.  They  were  not  going  to 
fight  out  any  forlorn  hope  on  the  battle-field  merely  to 
uphold  their  military  honor  before  the  nations,  if  the 
consequence  was  to  be  injurious  to  their  hopes  of  com- 
mercial supremacy.  They  stopped  the  war  with  their 
armies  still  intact,  with  their  soil  untouched,  with  their 
industrial  establishments  erect,  with  fires  burning  and 
wheels  revolving.  In  the  course  of  their  war  they  had 
made  it  their  business  to  inflict  the  utmost  possible  de- 
struction on  the  economic  property  of  their  competitors 
in  business,  whether  belligerents  or  neutrals.  Their  sub- 
marine campaign  against  merchant  shipping  unquestion- 
ably was  motived  in  an  important  way  by  economic  con- 
sideration. Honor  or  no  honor,  they  must  have  the 
economic  advantage;  they  must  keep  their  own  recon- 
struction problems  to  a  minimum;  they  must  be  fresh 
and  ready  to  start  in  the  new  race. 

The  bringing  of  the  United  States  into  the  war,  which 
seemed  such  an  egregious  blunder,  was  not  a  blunder 
from  the  German  point  of  view,  since  it  imposed  an 
enormous  economic  waste  on  this  country  which  other- 


FOR  A  NEW  MORAL  CODE  105 

wise  was  growing  tremendously  powerful  in  a  commer- 
cial way,  far  too  powerful  not  to  alarm  the  Germans  who 
kept  the  commercial  future  ever  before  their  mind. 

There  need,  therefore,  be  no  apology  for  delving  into 
the  systematic  iniquities  of  German  commercial  methods, 
since  Germany  has  not  been  removed  as  a  commercial 
menace  to  the  world  and  since,  even  if  she  had  been, 
the  methods  which  Germany  originated  are  quite  likely 
to  be  followed  by  others,  unless  this  country  and  those 
Hke  it  which  champion  free,  clean,  live-and-let-live  prin- 
ciples in  commerce,  succeed  in  restoring  to  the  world  the 
ideals  that  made  of  industry  and  commerce  a  noble  and 
honorable  avocation. 

Every  American  engaged  in  industry  and  commerce 
would  rejoice  if  business  were  really  freed  from  its  worst 
incubus,  if  it  were  an  established  fact  that  the  old  Amer- 
ican principles  of  freedom  and  honesty  and  above-board 
methods  in  competitive  trade  were  re-instated  through- 
out the  world.  But  unfortunately  there  is  nothing  to 
prove  it,  apart  from  the  conjectures  of  some  well-inten- 
tioned but  obviously  ill-informed  persons.  On  the  con- 
trary, there  is  every  reason  to  believe  that  nothing  of  the 
kind  has  occurred. 

Towards  the  end  of  191 7  German  business  men  began 
to  agitate  more  or  less  openly  the  prospect  of  Germany 
losing  the  w.r  and  the  measures  which  in  that  case  should 
be  adopted  so  that  defeat  might  be  converted  into  vic- 
tory. Then  began  the  conventions  of  leading  merchants 
and  manufacturers,  which  were  held  in  Hamburg. 

Hamburg,  we  heard  at  that  time,  was  revolting  against 
Berlin.  Vigorous  speeches  of  the  late  Albert  Ballin  and 
other  business  magnates  were  quoted  as  indicating  that 
the  men  who  in  industry  and  commerce  had  been  the 


106         AMERICA  IN  WORLD  MARKETS 

makers  of  the  great  and  prosperous  modern  Germany 
were  breaking  loose  from  the  Junkers  and  the  Military 
Party  who  were  dominating  the  Empire.  The  close  ob- 
server, however,  had  reason  to  be  sceptical  regarding  the 
pretended  arraying  of  Hamburg  against  Berlin.  He 
learned,  for  instance,  that  Government  officials  were  lend- 
ing the  prestige  of  their  presence  to  some  of  these  Ham- 
burg conventions.  At  one  of  them,  in  November,  191 7, 
Herr  Huldermann,  a  director  of  the  Hamburg-American 
Steamship  Company,  delivered  an  address  in  which  he 
more  or  less  openly  contemplated  the  failure  of  the  Ger- 
man armies  in  the  field  and  forecast  the  future  in  that 
event.  Scores  of  Reichstag  deputies  and  representatives 
of  several  of  the  Imperial  Government  departments  were 
present  on  the  occasion,  having  been  conveyed  to  Ham- 
burg in  special  trains.  Although  the  Hamburg  men  were 
supposed  to  be  "in  revolt,"  there  was  a  distinctly  official 
air  about  the  meeting. 

Herr  Huldermann  said  that,  in  the  worst  eventuality 
for  Germany,  it  would  be  part  of  the  stipulations  in  the 
peace  conference  that  that  country's  enemies,  the  Allies 
and  the  United  States,  would  agree  to  pool  their  raw 
materials  and  to  allot  a  share  to  Germany,  and  would 
also  pool  their  shipping,  with  Germany  again  receiving 
her  allotment.  It  would  be  necessary,  he  said,  for  the 
business  men  of  Germany  to  be  allowed  a  prime  share 
in  the  administration  of  the  State.  The  diplomatic 
service  and  the  foreign  representation  generally  should 
be  the  prerogative  solely  of  those  versed  in  economic 
matters.  The  men  who  had  made  Germany  rich  by  their 
dealings  with  foreign  countries  should  be  entrusted  with 
the  task  of  re-establishing  friendly  feelings  for  Germany 
on  the  part  of  those  who  had  been  her  enemies. 


FOR  A  NEW  MORAL  CODE  107 

He  described  the  plans  for  quickly  renewing  German 
commerce  with  the  neutral  nations  and  pointed  out  the 
prospects  for  the  expansion  of  German  commerce  in  cen- 
tral and  eastern  Europe,  through  the  development  of 
waterways,  closer  union  with  Austria  and  other  means. 
His  speech  was  distributed  broadcast  to  the  business  men 
of  Germany  and  was  heralded  in  business  organs  as  an 
encouraging  and  satisfying  announcement.  It  will  be 
worth  watching,  by  the  way,  to  see  how  good  a  prophet 
Herr  Huldermann  was.  At  any  rate,  here  was  issued  an 
intimation  that  if  Germany  lost  the  war  the  Military 
Party  would  hand  over  the  reins  to  the  business  leaders 
— Berlin  would  yield  to  Hamburg. 

With  the  signing  of  the  armistice  the  military  oli- 
garchy surrendered  control  of  the  government.  The  busi- 
ness men  did  not — or  at  least  did  not  openly — assume 
control.  There  occurred  what  appeared  to  be  an  inter- 
regnum— the  customary  phenomenon  in  the  change-over 
from  one  order  to  another.  In  this  case  it  looked  like 
good  business.  There  are  times  when  a  simulation  of 
disorder  is  first-class  strategy.  General  Joffre,  in  the  last 
week  of  August  and  in  the  first  days  of  September,  1914, 
deliberately  gave  the  appearance  of  disorderly  rout  to 
the  retirement  of  his  forces  to  the  positions  on  the  Ourcq 
and  the  Marne,  where  he  had  decided  that  the  great  bat- 
tle should  be  fought.  Von  Kluck  with  the  German  First 
Army  blundered  headlong  into  the  trap  that  had  been  laid 
for  him. 

Great  homogeneous  nations  of  modern  times  show  the 
power  of  quick  recuperation  from  disastrous  wars. 
France  after  1871  "came  back"  with  a  strength  and  ra- 
pidity that  surprised  the  world,  although  in  the  period 
immediately  after  her  disaster  she  had  to  contend  with 


108         AMERICA  IN  WORLD  MARKETS 

the  Communist  troubles,  which  seemed  grave  indeed  at 
the  time. 

To  speak  of  disaster  in  Germany's  case  is  probably  a 
misuse  of  words.  The  end  of  the  war  saw  Germany  in 
relatively  good  physical  condition,  in  comparison  with 
the  other  nations  of  Europe.  The  "Imperial  democratic 
government,"  as  Premier  Clemenceau  characterises  it, 
was  put  in  the  hands  of  "Socialists"  probably  long  pre- 
ordained for  the  task.  Ebert  and  Scheidemann  were  as 
much  a  part  of  the  imperial  war  organisation  as  the  Kai- 
ser himself.  They  or  others  like  them  could  be  expected 
to  stay  in  power  as  long  as  sympathy  was  a  desideratum 
and  until  Germany,  in  apparent  abasement  and  abandon- 
ment, obtained  a  "good  peace."  Afterwards  we  might 
perhaps  look  for  the  fulfilment  of  Herr  Huldermann's 
forecast  of  the  taking  over  of  the  administration  by  Ger- 
many's business  men. 

But  no  radical  change  in  German  commercial  methods 
need  be  looked  for.  Herr  Huldermann,  in  that  comfort- 
ing address  to  German  business  men  dealing  with  the 
eventuality  of  loss  of  the  war  in  the  field,  spoke  of  the 
other  war,  the  economic  war,  which  must  go  on  and 
which  Germany  must  win.  The  commercial  war  is  still 
on.  It  had  never  ceased.  And  it  allows  no  place  for  the 
ethics  of  commerce  as  understood  in  America.  The  sci- 
entific methods  of  "economic  penetration"  as  taught  in 
the  Handelsakademien,  the  Polytechnika,  the  business 
academies  and  colleges  of  Germany,  and  as  practiced  by 
the  diplomatic,  the  financial  and  the  commercial  organi- 
sations of  that  country,  are  founded  on  unscrupulous  dis- 
regard for  common  honesty  and  for  the  rights  of  others. 
Schrecklichkeit — frightfulness — which  was  at  the  basis 


FOR  A  NEW  MORAL  CODE  109 

of  German  methods  in  the  field,  is  discernible  also  in  the 
German  policy  of  commercial  warfare. 

German  propaganda  with  a  view  to  trade  advantage 
continued  during  the  war  and  still  continues.  Its  chief 
virulence  to-day  is  directed  against  the  United  States. 
From  all  over  Europe  we  have  reports  of  the  energetic 
campaign  being  waged  in  the  interest  of  German  com- 
merce by  special  agents  and  by  the  diffusion  of  printed 
matter.  American  correspondents  have  cabled  accounts 
of  the  "tireless  German  propaganda"  which  is  being  car- 
ried on  for  the  purpose  of  disrupting  the  good  relations 
between  the  Allies  and  the  United  States. 

The  Department  of  Commerce  has  published  some 
items  regarding  German  commercial  practices  in  Den- 
mark, which  indicate  that  there  is  no  change  in  the  meth- 
ods which  have  come  to  be  known  as  characteristically 
German.  The  State  Department  has  let  it  be  known 
that,  according  to  its  advices  from  The  Hague,  Pro- 
fessor Brinckmann  was  in  Holland  in  charge  of  Ger- 
man propaganda  for  foreign  countries,  and  that  he  was 
actively  engaged  in  a  particularly  vicious  campaign 
against  the  United  States.  The  advices  intimated  that 
Herr  Brinckmann  had  agents  in  the  United  States  who 
were  keeping  under  cover,  but  who  were  giving  occa- 
sional evidences  of  their  activities. 

Herr  Brinckmann  is  one  of  Germany's  well-known 
teachers  of  the  "scientific"  way  of  developing  commerce 
to  the  detriment  of  other  nations.  If  the  "Socialist" 
government  kept  him  in  office  months  after  the  signing 
of  the  armistice  and  authorised  him  to  continue  his  work, 
it  is  an  object  lesson  which  American  business  cannot 
afford  to  overlook  regarding  the  continuity  of  German 
commercial  policy. 


110         AMERICA  IN  WORLD  MARKETS 

And  let  there  be  no  easy  assumption  that  Germany's 
commercial  influence  abroad  has  been  destroyed  as  a  re- 
sult of  the  war.  One  significant  incident  in  this  connec- 
tion can  now  be  made  known  without  prejudice  to  the 
interests  of  Germany's  adversaries.  When  Great  Britain 
started  the  blacklisting  of  German  firms  abroad,  a  num- 
ber of  German  banks  and  business  firms  on  the  west  coast 
of  South  America  came  under  the  ban.  These  German 
concerns  determined  to  retaliate  by  doing  a  little  black- 
listing of  their  own.  So  powerful  were  they  that  Brit- 
ish, French  and  American  houses  were  thereby  stopped 
from  doing  business.  It  was  regarded  as  the  part  of 
wisdom  for  the  British  Government  quietly  to  suspend 
that  part  of  its  blacklist  against  the  Germans  and  busi- 
ness was  resumed. 

Thus  far  at  least  the  leopard  has  not  changed  his  spots 
and  it  would  be  imprudent  for  American  business  men 
to  disregard  warnings  of  conditions  that  continue  to  be 
a  menace  to  the  free  development  of  American  commerce. 

With  the  coming  of  peace  the  German  business  men 
are  getting  together  again  in  their  beer  halls.  With  their 
methodical  gregarious  habit  they  meet  at  certain  hours 
on  certain  days  around  the  old  Stammtisch,  "the  tribal 
table,"  around  which  the  fathers  and  even  the  grand- 
fathers of  some  of  them  may  have  met  in  the  past.  Tables 
of  various  sizes,  each  with  its  group,  are  distributed 
throughout  the  hall.  And  the  individual  group  with 
characteristic  air  of  solemnity,  and  amid  ceremonious 
"prosits,"  gets  down  promptly  to  serious  talk  of  construc- 
tive character. 

"We  fought  the  good  fight,"  we  can  hear  them  say. 
"We  took  hard  knocks.  Our  heads  are  bloody ;  but  un- 
bowed.    We  gave  as  good  as  we  got.     For  four  years 


FOR  A  NEW  MORAL  CODE  111 

we  stood  off  the  rest  of  the  world — all  of  it  that  counts. 
We  have  been  set  back  a  good  deal.  But  we  set  our 
enemies  back  still  more.  We  came  home  with  banners 
flying  and  bands  playing,  back  to  our  soil  which  had 
been  unscathed.  We  dealt  blows  that  our  enemies  can- 
not recover  from  for  many  years,  and  in  the  meantime 
we  shall  get  off  with  a  good  start  to  carry  out  our  plans, 
to  beat  down  the  obstacles  that  stand  in  our  way.  The 
first  round  is  over.  The  second  begins.  We  shall  work 
as  we  never  worked  before.  We  cannot  be  beaten.  We 
are  of  the  stuff  that  makes  world  conquerors." 

Germany's  business  men  defended  and  approved,  and 
thus  accepted  their  share  of  responsibility  for  German 
crimes  in  war.  They  have  accepted  like  responsibility 
for  Germany's  treacherous  commercial  policy.  But  it 
would  be  vain  to  make  note  of  the  fact  or  to  waste  time 
in  denunciations,  if  we  are  not  going  to  act,  to  use  the 
knife  to  hack  out  the  German  cancer  so  that  it  will  not 
grow  again.  The  German  methods  have  been  in  our 
midst  befouhng  America's  trade  reputation.  They  must 
be  ruthlessly  destroyed,  no  matter  who  is  injured  in  the 
destroying.  Let  us  know  the  German  "scientific"  meth- 
ods of  trade,  so  that  we  may  recognise  the  danger  and 
so  that  in  international  trade  relations  we  may  replace 
the  German  spirit  of  greed  and  foul  dealing  by  American 
honor  and  character,  straight-line  methods,  helpfulness 
and  good  will. 


CHAPTER  II 

PROTECTION  OF  AMERICAN  TRADE 

Government  Apathetic  in  the  Past — American  Interests 
Attacked  with  Impunity — Business  Men  Must  Unite 
for  Their  Protection — Task  Involves  Work  Admin- 
istration Cannot  Undertake — What  American  Trade 
Faces  in  the  Future — How  Germany  Stands  Indus- 
trially. 

The  Government  undoubtedly  can  do  much — it  is  ac- 
tually doing  much — in  the  interest  of  the  foreign  trade 
and  industry  of  the  United  States.  But  the  tasks  that 
are  ahead  for  the  protection  of  the  industries  and  com- 
merce of  this  country,  and  on  which  not  a  moment 
should  be  lost,  are  so  variegated  that  some  of  them  are 
of  a  kind  that  the  Government  organisations,  as  at  pres- 
ent constituted,  are  not  in  the  best  position  to  under- 
take. 

All  that  pertains  to  commerce  protection  supposedly 
falls  within  the  competence  of  the  national  Government. 
Governments  generally  in  the  years  immediately  preced- 
ing the  war  were  taking  a  quite  paternal,  if  not  patron- 
ising, view  of  their  relations  to  trade  and  were  "doing 
something"  for  home  business. 

All  at  once  there  was  quite  a  burst  of  activity.  The 
Imperial  Russian  Government  sent  out  a  swarm  of  com- 
mercial agents,  independent  of  the  consular  service  and 
of  higher  rank  than  the  consuls.     These  agents  estab- 

112 


PROTECTION  OF  AMERICAN  TRADE     113 

lished  headquarters  in  the  principal  commercial  cities  of 
Europe,  advertised  in  the  local  press,  delivered  lectures 
and  held  "conferences"  under  the  auspices  of  the  local 
authorities  and  loudly  notified  the  world  that  Russia  had 
desirable  wares  to  export  and  was  anxious  for  all  kinds 
of  trade  information.  Italy  sent  out  a  number  of  royal 
commissioners  to  cover  various  lines  of  trade  and  the 
prestige  of  their  rank  assured  them  a  dignified  reception 
wherever  they  went.  England  appointed  commercial 
experts  abroad — some  of  them  Germans.  Knighthood 
titles  were  conferred  on  them,  and  Sir  Knight  and  his 
Lady  were  conspicuous  at  German  civic  functions. 
American  trade  agents  filled  a  somewhat  different  role, 
being  sent  out  for  specific  work  of  a  restricted  and  prac- 
tical kind. 

Germany,  it  may  be  noted,  did  not  enter  into  the  gen- 
eral rivalry  in  the  use  of  the  much  heralded  commis- 
sioners or  agents.  If  she  had  parties  out  watching  other 
peoples'  business,  she  did  not  advertise  the  fact. 

It  was  felt  in  Europe  generally  that  the  treatment  of 
American  trade  abroad  on  the  part  of  its  own  Govern- 
ment was  rather  shabby.  This  was  ascribed  to  the  politi- 
cal war  on  the  great  American  corporations.  When 
Germany,  a  few  years  ago,  undertook  to  confiscate  the 
property  of  the  Standard  Oil  Company  by  the  creation 
of  an  Imperial  Petroleum  Sales  Monopoly  (Petroleum- 
Verkaufs-Monopol)  who  was  there  to  dare  vindicate  the 
rights  of  an  American  corporation  ?  Every  attack — ^and 
it  happened  that  there  were  many  in  that  particular  pe- 
riod— made  in  the  United  States  on  the  Standard  Oil 
Company  and  other  large  American  businesses,  was 
cabled  to  Germany  and  printed  conspicuously  by  the 
press.    The  German  press  gladly  disseminated  the  news 


114         AMERICA  IN  WORLD  MARKETS 

that  the  Standard  Oil  Company  was  the  old  "he  trust," 
in  the  elegant  characterisation  of  an  American  Senator. 
All  who  ran  might  read  in  Germany  of  the  utter  iniquity 
of  American  business,  and  Germans  felt  that  there  was 
practically  no  limit  to  what  they  might  do  against  Amer- 
ican corporations. 

And  these  corporations  pathetically  continued  to  lean 
on  the  slender  reed  of  their  own  Government's  protec- 
tion. They  did  not  dare  to  do  the  one  thing  palpably 
indicated  by  their  own  best  interests,  namely,  to  combine 
for  their  protection  in  foreign  markets.  The  odium 
which  had  been  spread  around  them  was  not  confined  to 
Germany.  German  agents  took  care  to  circulate  it  in  all 
the  countries  in  Europe  in  which  Americans  were  their 
competitors.  There  is  a  residuum  of  it  left,  despite  all 
the  benefactions  America  has  conferred  on  European 
countries  in  the  last  few  years. 

What  they  failed  to  do  in  the  past,  American  corpora- 
tions will  have  to  do  now.  They  will  have  to  organise 
for  protection.  The  sooner  they  begin  to  make  their 
preparations  the  better  it  will  be  for  them.  They  can 
look  after  their  interests  in  a  way  which  the  Government 
could  not  be  expected  to  do  for  them.  The  Government 
will  be  busy  with  other  problems.  In  any  case  the  Gov- 
ernment could  not  very  well  undertake  a  specialised  form 
of  trade  protection,  and  yet  it  is  against  particular  coun- 
tries, against  Germany  and  those  that  follow  German 
methods,  that  American  trade  needs  protection. 

Besides,  even  if  there  were  no  other  difficulties,  Gov- 
ernment agents  would  not  be  the  desirable  instruments 
for  the  protection  of  American  business  against  organ- 
ised and  insidious  attack.  American  merchants  and  man- 
ufacturers must  select  their  own  agents.     The  Govern- 


PROTECTION  OF  AMERICAN  TRADE     115 

ment,  of  course,  can  rightly  be  called  upon  to  insist  on 
the  removal  of  some  of  the  outrageous  disabilities  placed 
on  American  trade  in  Germany,  such  as  the  practical  obli- 
gation, if  an  American  firm  is  going  to  do  business  in  any 
large  way,  of  organising  a  subsidiary  German  company 
and  thereby  laying  itself  open  to  a  minute  and  continu- 
ous inquiry  into  its  affiliations  in  all  parts  of  the  globe, 
its  business,  its  processes  and  methods.  If  the  details 
that  are  thus  extorted  do  not  furnish  the  German  depart- 
ment of  economics  with  every  last  fact  it  is  looking  for, 
they  provide  material  for  the  German  trade  spies  in  other 
countries  to  supplement  the  information. 

It  cannot  be  expected  that  the  American  Government 
will  undertake  the  work  of  ferreting  out  the  snares  and 
ambushes  that  are  laid  for  American  trade  throughout 
the  world  by  the  German  system.  This  would  inevitably 
develop  into  a  form  of  official  trade  warfare  in  which  the 
United  States,  with  its  above-board  methods,  would  be 
but  ill  equipped  to  compete.  The  work  falls  on  the  shoul- 
ders of  the  American  traders  themselves.  And  they 
should  not  allow  themselves  to  be  distracted  from  the 
urgency  of  undertaking  this  work  by  anodyne  reports 
regarding  Germany's  physical  condition.  What  Ger- 
many did  to  American  trade  in  the  past  was  only  a  trifle 
compared  to  what  she  is  already  prepared  to  do  in  the 
future,  if  steps  are  not  taken  to  remove  from  world  com- 
merce the  dishonoring  processes  that  are  threatening. 

Reports  that  Germany  is  exhausted,  that  her  work- 
ingmen  are  anaemic  from  starvation,  that  her  railroads 
and  manufacturing  plants  are  hopelessly  run  down,  and 
that  she  will  be  far  behind  when  the  commercial  race 
begins,  may  well  be  suspected  of  being  a  rather  coarse 
form  of  German  propaganda.     War,  instead  of  totally 


116         AMERICA  IN  WORLD  MARKETS 

exhausting  Germany's  industrial  and  trading  potential- 
ities, actually  organised  Germany  anew  for  commerce. 
The  vast  majority  of  the  plants  that  were  working  to 
capacity  on  war-time  production  can  be  turned  over  to 
commercial  production;  the  plans  for  the  shift-over  were 
long  previously  made,  just  as  the  arrangements  for  the 
shifting  of  the  aniline  dye  and  heavy  chemical  factories 
to  the  manufacture  of  explosives  had  been  made  and 
were  instantly  put  into  effect  when  the  war  began.  Com- 
merce will  be  conducted  under  a  concentrated  organisa- 
tion similar  to  that  which  proved  so  effective  in  the 
conduct  of  warfare. 

Germany  expects  to  be  in  better  shape  after  the  war 
than  any  other  European  country.  Russia,  economically, 
she  expects  will  be  her  province.  The  neutral  European 
countries,  irrespective  of  where  the  sympathies  of  their 
peoples  may  lie,  were  Germany's  economic  allies  during 
the  war,  and  will  continue  to  be  markets  of  supply  and 
demand  for  Germany. 


CHAPTER  III 
Germany's  peace  plans  during  war 

Open  and  Underhand  Methods — Transition  Economy — 
Institutions  for  Industrial  Concentration — Raw  Mate- 
rials and  Shipping — Foreign  Exchange— Germany's 
Continued  Power  in  Foreign  Countries — Organisation 
Needed  to  Meet  Organisation — German  Methods  Dif- 
fer in  Different  Countries. 

Germany's  preparations  for  peace  fell  into  two 
classes,  those  that  were  more  or  less  open  and  straight- 
forward, and  those  that  were  distinctly  underhand.  It 
is  the  existence  of  the  latter  that  makes  it  imperative  for 
American  business  men  to  plan  energetic  measures  for 
trade  protection.  But,  first  of  all,  the  open  and  above- 
board,  preparations — "above-board"  being,  of  course, 
something  of  a  euphemism,  for  Germans,  in  all  their 
national  and  State-promoted  activities  had  been  getting 
far  away  from  old-time  fair-play  methods. 

As  in  time  of  peace  Germany  had  made  ready  for  the 
immediate  turn-over  of  the  whole  national  existence  to 
the  war  footing,  so  in  time  of  war  she  was  diligently 
preparing  for  the  passage  from  the  "economy  of  war" 
to  the  "economy  of  peace,"  An  Imperial  Commission 
for  the  "transition  establishment" — the  Uebergangswirt- 
schaft — was  appointed  by  the  Federal  Council  of  the 
Empire. 

The  President  of  the  Commission  and  its  members 

117 


118         AMERICA  IN  WORLD  MARKETS 

were,  according  to  a  decree  of  the  Federal  Council,  to 
"have  the  right  to  examine  the  correspondence,  the  reg- 
isters and  the  books  of  the  commercial  houses  and  to 
visit  their  warehouses." 

Herr  Stahmer,  one  of  the  most  noted  of  the  Ham- 
burg men,  was  appointed  President  of  the  Commission. 
He  had  been  closely  associated  with  the  German  military 
administration  from  the  beginning  of  the  war  and  had 
held  the  important  position  of  civil  governor  of  Antwerp. 
Herr  Stahmer  is  also  known  as  the  guiding  spirit  in  lay- 
ing the  plans  for  the  "economic  penetration"  of  the 
United  States.  His  two  chief  lieutenants  were  the  late 
Albert  Ballin  and  Herr  Huldermann,  also  of  the  Ham- 
burg-American Steamship  Company.  Huldermann  was 
his  chief  mouthpiece. 

Germany  made  no  mistake  about  the  difficulty  of  the 
problems  that  the  transition  would  involve.  The  world- 
wide antipathy  which  German  atrocities  aroused  was  re- 
garded as  one  of  the  merely  minor  obstacles  to  be  faced. 
The  revival  of  shipping,  the  providing  of  the  raw  mate- 
rials for  industry,  the  quick  "economic  penetration"  of 
foreign  markets  were  the  questions  they  considered  of 
prime  importance.  It  is  significant  that  the  Germans 
viewed  the  whole  matter  in  terms  of  competition  and  that 
the  Commission's  work  was  popularly  referred  to  as 
preparation  for  the  "trade  war,"  the  other  war  which  was 
to  begin  when  the  war  of  blood  ended. 

Before  the  Imperial  Commission  was  established,  an 
"institution  for  industrial  concentration"  was  organised 
by  "private  individuals,"  under  government  auspices,  for 
the  purpose,  as  it  was  stated  at  the  time,  of  giving  "bet- 
ter support  in  the  future  to  competition  with  foreign 
countries,  whether  this  military  war  is  to  be  followed 


GERMANY'S  PEACE  PLANS  119 

by  an  economic  war,  or  whether  the  needs  of  commerce 
and  of  Hfe  will  impose  their  pacific  exigencies  on  those 
peoples  who  are  now  our  enemies."  This  was  the  be- 
ginning of  the  intensive  syndicalisation  of  German  in- 
dustries. The  founding  of  the  Imperial  Commission  rep- 
resented the  formal  taking  over  by  the  Government  of 
the  work  that  was  being  attempted  by  this  "private  in- 
stitution," The  explanation  given  was  that,  as  the  State 
had  been  regulating  to  a  constantly  greater  extent,  not 
merely  the  providing  and  distribution  of  foodstuffs,  but 
also  imports  and  exports  and  prices  and  rations  of  prod- 
ucts of  all  kinds  to  merchants  and  manufacturers,  it 
was  natural  that  the  State  should  prepare  to  intervene 
in  after-war  commerce  by  means  of  an  organisation  that 
should  gather  and  distribute  commodities  and  should 
regulate  traffic  of  all  kinds  and  direct  the  principal  ac- 
tivities of  industry  and  commerce. 

The  first  problem  for  the  Imperial  Commission  was 
stated  to  be  that  involved  in  the  procuring  of  raw  mate- 
rials, for  the  industries  of  Germany  as  well  as  for  the 
sustenance  of  her  people,  and  shipping  to  carry  them. 
German  trade  publications  were  quick  to  point  out  ob- 
jections to  the  State  assuming  this  role,  on  the  ground 
that  it  would  interfere  with  the  freedom  of  commerce. 
Herr  Huldermann  swept  aside  these  objections.  The 
State  knew  where  it  would  get  the  raw  materials,  and 
the  Commission,  it  was  stated,  would  co-ordinate  the  ex- 
igencies of  industry  with  the  shortage  of  tonnage,  and 
would  obviate  the  confusion  which  private  enterprise 
would  involve. 

The  Commission  was  to  lay  down  the  rules  according 
to  which  German  industries  were  to  obtain  their  supplies 
from  abroad     To  this  end  the  leading  firms  engaged 


120  AMERICA  IN  WORLD  MARKETS 

before  the  war  in  the  importation  of  raw  materials  were 
to  be  brought  into  a  single  organisation.  It  was  stated  in 
the  German  press  that  branches  of  this  organisation  had 
been  established  in  Hamburg,  Bremen  and  Dantzig. 
From  this  organisation  were  excluded  the  firms  that 
"are  not  financially  strong  or  that  are  suspected  of  being 
inclined  to  indulge  in  speculation  or  profiteering."  Here 
many  small  importing  houses  raised  their  voice  in  pro- 
test at  being  excluded  from  the  organisation,  which  they 
denounced  as  a  scheme  on  the  part  of  the  big  firms  to 
freeze  them  out  and  to  establish  a  great  trade  monopoly, 
but  only  passing  attention  was  given  to  their  protests. 

The  mode  of  regulating  the  carrying  of  freight  from 
abroad  to  German  ports,  rapidly  and  at  lower  cost,  was 
to  be  determined  by  putting  the  German  steamship  com- 
panies directly  under  the  control  of  the  Commission  and 
by  making  all  foreign  carriers  deal  directly  with  it.  AH 
arrivals  and  departures  of  ships  for  an  indefinite  period 
after  the  war  were  to  be  under  Government  control. 

Freight  rates  were  to  be  fixed  by  the  Commission,  but 
German  manufacturers  received  notice  that,  as  the  ship- 
ping industry  had  suffered  severely  during  the  war,  rates 
would  have  to  be  fixed  to  allow  the  shipping  companies 
to  recoup  some  of  the  past  losses,  especially  in  carrying 
products  for  the  non-essential  industries.  The  distri- 
bution of  imported  products  among  the  various  indus- 
tries would,  it  was  admitted,  present  some  difficulty,  and 
the  Commission,  it  was  announced,  would  eliminate  all 
bickerings  by  preparing  a  schedule  showing  the  average 
importation  by  the  various  firms  in  the  years  preceding 
the  war  and  thereby  regulating  allotments.  This  was 
regarded  as  a  sop  to  the  small  firms  which  had  been  pro- 


GERMANY'S  PEACE  PLANS  121 

testing,  but  it  was  understood  that  it  did  not  allay  their 
alarm. 

Another  problem  which  the  Commission  undertook  to 
handle  was  foreign  exchange.  With  imports  at  the  maxi- 
mum for  a  period  after  the  war  and  exports  at  a  mini- 
mum, it  was  foreseen  that  German  funds  would  need 
support.  Various  expedients  were  to  be  resorted  to  and 
it  was  intimated  that  all  foreign  securities  in  the  hands 
of  German  subjects  would  be  seized  to  make  payments 
abroad. 

Later  on  the  work  of  the  Commission  was  taken  over 
by  the  newly  formed  Ministry  of  Economics. 

To  meet  the  German  peril,  as  has  been  said,  it  will  be 
necessary  for  American  business  to  acquire  an  accurate 
idea  of  the  seriousness  of  that  peril.  This  will  be  done 
only  by  learning  its  ramifications,  its  world-wide  dissemi- 
nation, its  remarkable  organisation,  and  its  insidious 
working  methods. 

When  the  Allies  began  to  call  last  year  on  the 
100,000,000  bushels  of  wheat  in  Argentina  and  the  move- 
ment of  the  grain  from  the  interior  to  the  sea  coast  was 
started,  on  a  word  of  order  from  Germany  railroad 
tracks  were  dynamited,  cars  were  burned  and  strikes 
effectively  interfered  with  the  handling  of  the  grain. 
This  was  in  Argentina,  thousands  of  miles  away  from 
supposedly  harassed,  hungry,  war-weary  Germany. 

In  England,  German  agents  were  accidentally  surprised 
in  the  act  of  securing  valuable  coal  mines,  which,  if  the 
transfer  had  been  effected  and  gone  through  undiscov- 
ered, would  have  been  working  for  Germany  even  dur- 
ing the  course  of  the  war.  England  did  not  succeed  in 
surprising  the  German  agent,  Hugo  Schmidt,  in  the  act 
of  supplying  Germany  during  the  war  with  jute,  wool 


122         AMERICA  IN  WORLD  MARKETS 

and  cotton,  largely  from  British  territories  and  using 
London  banks  in  the  process.  It  was  the  United  States 
that  made  the  discovery  in  this  case,  and  it  was  only  the 
indiscretion  of  the  German  agent,  in  keeping  records  of 
the  transactions  in  his  New  York  Office,  that  permitted 
the  facts  to  become  known. 

During  three  years  of  the  war  Germany  was  drawing 
great  supplies  of  metals  from  the  United  States,  while 
all  the  time  we  were  speculating  on  the  exhaustion  of 
her  metal  resources  and  on  the  "substitutes"  she  must  be 
using  for  copper  and  other  necessary  metals.  We  now 
know  also  that  large  quantities  of  materials  were  being 
stored  up  in  this  country  for  shipment  to  Germany  after 
the  war. 

Is  there  any  reason  to  believe  that  the  Germans  will 
spontaneously  abandon  their  already  successful  system 
of  spreading  the  prestige  of  Germany  in  world  mar- 
kets at  the  expense  of  the  United  States,  of  taking  orders 
abroad,  then  buying  the  merchandise  in  the  United 
States,  carrying  it  to  Germany  and  reshipping  it  to  the 
foreign  purchaser  as  German  wares,  and  thus  paving 
the  way,  through  high-class  products,  for  the  later  intro- 
duction of  cheap,   inferior   German  manufactures? 

What  will  America  do  to  meet  any  such  organised 
"trade  war"  as  Germany  had  planned?  Utterly  repug- 
nant would  be  a  counter-organisation  for  trade  war. 
Whatever  the  outcome  might  be,  there  are  certain  paths 
on  which  Americans  could  not  engage.  But  the  advan- 
tages which  can  accrue  from  an  organisation  of  the  Ger- 
man kind  should  compel  American  business  men  to  take 
measures  jointly  for  their  own  protection.  Sooner  or 
later  indeed  we  may  expect  that  American  business  will 
prganise  to  forestall  the  application  of  German  methods. 


GERMANY'S  PEACE  PLANS      123 

They  will  need  agents  to  ferret  out  the  whole  iniquitous 
system. 

Germany's  secret  trade  methods  were  different  in  Italy 
from  what  they  were  in  France  or  Denmark  or  in  Ar- 
gentina, and  different  in  those  countries  from  what  they 
were  in  the  United  States  or  China  or  Australia.  The 
organisation  which  American  business  will  have  to  es- 
tablish to  cope  with  the  German  type  of  trade  evil  will, 
therefore,  have  to  face  differing  problems  in  the  various 
countries  and  will  necessarily  be  conceived  on  a  broad 
and  comprehensive  scale. 


CHAPTER  IV 

HOW  COUNTRIES  WERE  EXPLOITED 

Denmark's  Free  Port — Germans  Used  It  to  American 
Detriment — How  the  Dye  Combine  Imposed  Itself 
on  France — Italy  Still  in  Danger  of  German  Clutch 
— Turkey  and  Russia  under  German  Economic  Dom- 
ination— Rights  Abroad  Which  American  Business 
Has  Now  Acquired  by  Actual  Purchase. 

Copenhagen  has  a  free  port,  which  proved  to  be  an 
important  source  of  revenue  for  Denmark,  but  a  far 
greater  benefit  for  Germany.  The  parked-off  area  con- 
tains a  number  of  "lagers"  or  warehouses.  Ships'  car- 
goes and  shipments  in  bulk  from  America  and  other  dis- 
tant countries,  destined  in  whole  or  part  for  lands  other 
than  Denmark,  are  unloaded  at  the  free  port,  deposited 
in  the  lagers  and  there  divided  up  for  distribution  and 
reshipment  to  Sweden,  Norway,  Russia,  Germany,  the 
Balkans  and  other  destinations. 

The  lagers  where  the  merchandise  is  housed  while 
awaiting  reshipment  have  been  for  the  most  part  con- 
trolled by  Germans — ^by  German  firms  or  firms  employ- 
ing German  agents,  or  Scandinavian  concerns  with  Ger- 
man affiliations.  When  the  machines  and  manufactured 
articles  from  America  leave  the  free-port  lagers  and  are 
put  aboard  German  steamers  and  those  of  other  nation- 
ality for  conveyance  toward  the  country  of  consignment, 
they  frequently  have  suffered  considerable  trans forma- 

124 


HOW  COUNTRIES  WERE  EXPLOITED     125 

tion.  Instances  have  been  verified  where  German  in- 
scriptions have  replaced  those  originally  appearing  on 
the  products,  and  the  credit  that  belonged  to  America 
and  other  countries  of  origin  was  greatly  diminished,  if 
not  entirely  lost. 

Denmark  cannot  probably  be  held  to  account  for  what 
goes  on  in  the  free-port  lagers,  and  it  can  hardly  be  con- 
sidered a  matter  for  Government  representations.  Amer- 
ican business  men  must  take  their  own  measures  for  the 
protection  of  their  rights.  An  obvious  step  for  them  to 
take  is  the  appointment  of  agents  to  watch  the  operations 
at  the  free  port,  to  trace  merchandise  from  the  home 
waters  to  final  destination  and  see  whether  it  is  as  truly 
American  at  the  end  of  the  voyage  as  it  was  at  the  start, 
or  whether  it  has  not  changed  its  nationality  at  the  Dan- 
ish way-station. 

Each  foreign  country  has  its  individual  German  prob- 
lem directly  interesting  American  trade.  The  great  de- 
velopment of  the  dye  industry  in  the  United  States  has 
brought  with  it  expressions  of  misgiving  regarding  its 
future  when  it  is  faced  once  more  with  German  compe- 
tition. A  glance  at  some  of  the  German  methods  with 
regard  to  dye  competition  may  prove  instructive. 

In  France  the  domestic  dye  industry  was  of  consider- 
able importance.  The  leading  dye  plants  were  in  the 
neighborhood  of  Saint  Denis,  the  controlling  companies 
having  their  headquarters  in  Paris.  A  day  came  when 
agents  of  the  German  dye  combine  approached  the 
French  manufacturers  with  a  proposition.  "We  are  de- 
veloping our  foreign  trade,"  they  said  in  substance,  "and 
we  are  in  a  position  to  come  into  the  French  market  in 
a  big  way.  But  we  Germans  are  frank  and  loyal;  we 
desire  to  be  fair,  to  be  even  generous.    If  you  will  make 


126  AMERICA  IN  WORLD  MARKETS 

an  agreement  with  us,  we  shall  be  glad  to  leave  you  two- 
thirds  of  the  French  market  and  to  take  only  one-third 
of  it  for  ourselves.  Of  course  if  you  do  not  make  the 
agreement,  we  cannot  promise  to  keep  our  hands  off 
the  other  two-thirds  also."  The  agreement  was  made. 
The  amiable  old  French  Senator  who  was  one  of  the 
leaders  of  the  industry  in  France  was  in  revolt,  but  he 
was  voted  down. 

So  the  Germans  went  into  the  French  market  in  their 
frank  and  simple  manner  and  loyally  they  notified  the 
Frenchmen,  in  accordance  with  the  agreement,  of  the 
names  of  the  French  dye  consumers  to  whom  they  were 
selling  and  the  quantities  sold — that  is  loyally  for  the 
first  two  or  three  months.  Then  they  ceased  to  be  heard 
from,  and  the  Frenchmen  began  to  learn  that  German 
dyes  were  being  sold  in  France  in  quantities  that  obvi- 
ously were  passing  the  one-third  limit  set  by  the  agree- 
ment. Remonstrances  were  unheeded,  but  when,  at  the 
end  of  the  year,  the  German  dye  combine  held  its  meet- 
ing, accounts  were  compared,  and  it  was  shown  that  con- 
siderably more  than  one-third  of  the  French  demand  had 
been  supplied  by  the  Germans,  the  latter  again  were 
frank  and  loyal.  "It  is  true,"  they  said,  "that  we  ex- 
ceeded our  allotted  share;  but  what  does  it  matter?  We 
shall  allow  to  you  French  dye  manufacturers  the  profits 
on  the  part  that  exceeded  one-third.  You  are  thus  ac- 
tually better  off  than  if  you  did  the  business  yourselves. 
You  are  getting  the  benefit  of  two-thirds  of  the  trade 
without  having  to  do  two-thirds  of  the  business."  And 
the  Germans  continued  to  encroach  in  a  constantly 
greater  way  on  the  French  share  of  the  trade  in  France. 

The  three  years'  agreement  had  not  run  out  when  the 
war  began,  and  one  can  only  surmise  whether  if  there 


HOW  COUNTRIES  WERE  EXPLOITED     127 

had  been  no  war,  the  Germans  would  have  renewed  the 
agreement  or  would  have  presented  a  new  and  less  fa- 
vorable proposition  to  the  Frenchmen.  It  should  not 
be  forgotten  that  materials  for  the  dye  industry  are  ma- 
terials also  for  the  manufacture  of  explosives,  and  that 
the  less  dye  business  the  French  manufacturers  were  in- 
duced to  do,  the  less  prepared  would  France  be  to  con- 
vert dye  factories  into  explosive  plants.  It  would  be  su- 
perfluous to  point  out  to  the  dye  manufacturers  of  this 
country  and  to  its  business  men  generally  the  lesson  of 
this  incident,  regarding  which  all  parties  concerned 
maintained  a  discreet  silence,  or  the  importance  of  their 
taking  action  to  unearth  and  circumvent  the  German  dye 
combine. 

Italy  as  a  foreign  market  is  in  danger  of  coming  again 
under  the  economic  clutch  of  Germany,  if  her  prayers 
for  co-operation  from  America  and  from  the  Allies  are 
not  hearkened  to.  The  heavy  German  investment  in  Italy 
has  not  by  any  means  been  entirely  confiscated.  As  in 
our  own  country,  much  of  it  has  been  hard  to  get  at. 
Transfers  of  property  and  of  businesses  executed  in  the 
nine  months  between  the  beginning  of  the  European  war 
and  Italy's  entry  into  it,  as  well  as  the  claims  of  Italian 
citizenship  by  leading  "German"  bankers  and  of  Swiss 
paternity  for  German  companies  operating  in  Italy  has 
left  German  commercial  property  in  Italy  to  a  large  ex- 
tent intact.  For  this  reason  Italian  merchants  and  manu- 
facturers continue  to  be  anxious  over  the  future  of  the 
nation's  commerce.  What  adds  to  their  concern  is  the 
fact  that  the  populace  of  Italy  view  the  German  with 
relative  indifference.  They  hated  Austria,  their  national 
enemy,  but  they  can  be  stirred  to  no  special  dislike  against 
Germany.     To  the  Italian  common  people  the  German 


128  AMERICA  IN  WORLD  MARKETS 

is  rozzo,  clumsy  and  coarse,  whatever  his  mental  quali- 
fications may  be.  The  opposite  of  rozzo  is  fino,  intel- 
lectually sharp  and  cunning.  The  Italian  can  hate,  or 
fear,  or  respect  a  person  who  is  fino,  but  can  feel  little 
more  than  contempt  for  one  he  regards  as  rozzo.  The 
Italian  masses  loathed  the  Austrians,  and  even  in  times 
of  peace  no  feast  day  celebration  in  an  Italian  city  was 
complete  without  a  demonstration  of  hostility  before  the 
Austrian  consulate,  but,  despite  the  revelations  regard- 
ing Germany's  trade  control  in  Italy,  all  efforts  have 
availed  little  to  create  a  patriotic  sentiment  of  hostility 
against  the  German  commercial  invader,  whom  they  con- 
tinue to  regard  as  merely  rozzo.  Italy's  merchants  are 
therefore  under  the  apprehension  that  the  conclusion  of 
peace  may  see  the  German  readily  resume  his  former 
place  in  the  popular  estimation  and  take  up  his  commer- 
cial activities  in  Italy  with  greatly  intensified  vigor. 

It  was  only  a  short  time  before  the  European  war  that 
the  Standard  Oil  Company  of  New  York  had  completed 
long-drawn-out  negotiations  with  the  Government  of 
Turkey  and  had  obtained  dock  and  wharfage  fran- 
chises at  Constantinople  and  made  elaborate  plans  in  the 
interests  of  its  Rumanian  oil  properties  and  of  newly  ac- 
quired territory,  believed  to  be  oil-bearing,  in  Bulgaria. 
The  transactions  were  kept  as  confidential  as  possible  but 
presently  all  the  German  powers  on  the  ground  began 
war  on  the  American  corporation.  The  local  represen- 
tative of  the  Deutsche  Bank,  the  chief  fiscal  agent  of 
the  Rumanian  oil  properties  financed  in  Germany,  and 
the  late  Baron  Hans  von  Wangenheim,  the  worthy  pre- 
decessor of  Count  von  Bernstorff  as  German  Ambassa- 
dor at  Constantinople,  brought  their  bludgeons  to  bear 


HOW  COUNTRIES  WERE  EXPLOITED    129 

and  the  Standard  Oil  Company  was  ousted  bag  and  bag- 
gage. The  American  corporation  saw  no  recourse  but  to 
accept  the  situation  philosophically  and  keep  quiet. 

Russia,  a  land  of  immense  natural  resources,  hith- 
erto barely  scratched,  was  regarded  by  the  enterprising 
merchants  in  every  country  as  a  land  of  promise  com- 
mercially. But  Russia,  even  before  the  war,  was  grad- 
ually being  enveloped  by  the  grip  of  the  German  trader- 
diplomat.  Most  of  the  manufacturing  industries  in 
Russia  of  a  modern  kind  were  directed  by  Germans,  if 
not  actually  controlled  by  them,  to  the  point  that,  wher- 
ever German  competition  made  it  possible,  no  other  for- 
eign machinery  manufacturer  or  exporter  of  raw  mate- 
rials had  much  chanct  against  the  German.  Other  coun- 
tries were  loaning  the  money  to  Russia  which  the  Ger- 
mans were  using  in  the  industries,  not  primarily  for  the 
benefit  of  Russia,  but  for  their  own  benefit  and  that  of 
the  Fatherland.  American  producers  of  manufacturing 
machinery  in  those  days  were  mystified  over  the  difficul- 
ties they  encountered  in  getting  into  the  Russian  market, 
and  when  they  began  to  surmise  that  the  German  factory 
heads  were  the  chief  obstacle,  a  ruse  was  adopted  to  throw 
them  off  the  scent.  All  at  once  the  German  superintend- 
ents and  managers  became  "Poles,"  friends  of  America, 
willing  to  further  American  trade.  The  ridiculous  decep- 
tion allowed  the  Germans  to  hoodwink  many  foreign 
exporters. 

The  enumeration  would  be  long,  even  tedious,  of  the 
trade  tactics  of  Germany  in  the  various  European  coun- 
tries to  a  participation  in  whose  commerce  the  United 
States  will  after  the  war  have  acquired — by  actual  pur- 
chase— an  increased  right.     The  aim  in  entering  into 


130  AMERICA  IN  WORLD  MARKETS 

these  details  is  to  indicate  some  of  the  less-known  prac- 
tices so  that  American  business  men  may  be  aroused  to 
the  urgency  of  taking  combined  action  for  the  safeguard- 
ing of  American  trade. 


CHAPTER  V 


THE  GERMAN   CARTEL 


The  Science  of  Industrial  Combination — ^The  Cartel  De- 
veloped by  Evolution — Government  Enters  as  Part- 
ner— Dumping  Carried  Out  with  All  the  Power  of  the 
State — When  German  Locomotives  Were  Imposed  on 
Italy  and  France — Foreign  Imitations  of  American 
Machinery — Agriculture  Also  Preyed  Upon. 

Germans  have  boasted  that  in  the  matter  of  scientific 
organisation  for  commerce  the  whole  world  would 
sooner  or  later  follow  the  German  example.  When  other 
nations  derided  the  merchandise  with  the  more  or  less 
opprobrious  label  "Made  in  Germany,"  the  Germans, 
though  they  did  not  take  it  with  good  grace,  went  ahead 
with  their  carefully  planned  campaign  and  profited  to  the 
full  of  the  opportunity  which  the  negligence  of  others, 
the  consequence  of  self-satisfied  superiority,  furnished 
them  to  disregard  the  generally  accepted  international 
rules  of  equity  and  fair  dealing.  They  extended  their 
commercial  sway  into  all  markets;  their  system  was  en- 
circling the  globe.  The  German  employe  was  in  the 
counting-houses  of  Paris,  London  and  New  York  and  in 
the  commercial  bureaus  of  every  leading  city  in  the  world. 

We  had  rather  stringent  laws  regulating  the  conduct 
of  business  by  our  own  people  but  we  overlooked  the 
need  of  making  laws  to  prevent  Germany  from  pursu- 
ing her  bandit  operations  in  fields  of  commerce  in  which 

131 


132  AMERICA  IN  WORLD  MARKETS 

we  had  eminent  domain  or  at  least  legitimate  interests. 
We  were  long  in  awakening  to  the  tremendous  physical 
power  which  Germany  developed  in  a  half-centnry  of  or- 
ganising to  crush  the  nations  of  the  world  by  brute  force. 
We  are  very  far  even  to-day  from  realising  the  powerful 
economic  hold  which  Germany  in  the  decades  during 
which  we  were  slighting  her  efforts  had  fastened  on  the 
world's  markets. 

With  profound  repugnance  we  were  forced  to  fight 
back  at  Germany  with  liquid  fire  and  poison  gas.  To 
fight  back  in  the  realm  of  commerce  are  we  going  to  be 
forced  to  abandon  our  traditions  of  individual  freedom 
in  trade,  to  submit  to  disciplining  and  dragooning  in  the 
handling  of  our  commerce?  Our  banking  systems,  our 
transportation,  our  industries,  our  whole  scheme  of  com- 
merce and  of  trade  development  are  interested  in  the  an- 
swer. Railways,  shipping,  banking,  materials  and  man- 
ufactures were  mobilised  in  the  United  States  for  the 
war.  Will  they  have  to  be  mobilised  again  if  Germany  is 
restored  to  her  commercial  position,  or  is  allowed  to  con- 
tinue the  process  which  had  made  of  her  a  world  menace 
no  less  in  commerce  than  in  military  might?  Will  it  be 
possible  for  the  free  peoples  to  put  a  stop  to  the  methods 
that  gave  her  ascendancy,  or  will  they  in  self-protection 
have  to  adopt  the  German  system  of  concentrations  and 
of  trade  espionage?  The  facts  regarding  the  German 
organisation  of  industry  and  commerce  demand  careful 
investigation,  quite  irrespective  of  the  troubles  that  may 
temporarily  beset  the  German  state. 

Frequent  mention  is  made  of  German  cartels  and  mo- 
nopolies and  many  business  men  in  America  have  come 
to  regard  them  as  the  bugbear,  the  root  of  the  German 
cancer  in  the  commerce  of  our  time.     Only  a  hazy  no- 


THE  GERMAN  CARTEL  133 

tion,  however,  of  what  the  German  cartels  and  monopo- 
lies are,  is  generally  to  be  found,  and  this  very  vagueness 
of  knowledge  seems  to  add  to  the  apprehension  with 
which  the  subject  is  viewed. 

One  reason  for  confusion  is  due  to  the  fact  that  the 
cartel  Is  not  a  stable  and  fixed  entity  or  conception. 
There  may  be  several  cartels  in  one  and  the  same  indus- 
try, and  each  industry  handles  its  cartels  in  accordance 
with  its  own  peculiarities  and  requirements,  so  that  car- 
tels may  be  as  varied  as  the  industries  to  which  they 
apply.  Another  source  of  confusion  lies  in  the  fact  that 
there  are  many  forms  of  industrial  and  commercial  com- 
bination in  Germany's  economic  life,  and  that  a  partic- 
ular kind  of  combination  is  alluded  to  in  Germany  by 
different  names. 

The  monopoly,  of  course,  implies  exclusive  State  con- 
trol. The  petroleum  monopoly  plan  of  half  a  dozen  years 
ago,  the  most  notorious  of  the  German  monopolies,  be- 
cause it  was  conceived  as  a  treacherous  violation  of 
American  rights  and  interests,  reserved  to  the  state  the 
sole  right  to  sell  petroleum  and  its  products,  although  the 
financing  of  the  sales  monopoly  was  entrusted  to  a  "con- 
sortium" of  German  industrial  banks.  A  "consortium," 
it  need  hardly  be  said,  is  a  union  of  banks  or  of  indus- 
trial, commercial  or  agricultural  concerns,  to  underwrite 
or  to  handle  a  given  enterprise.  "Community  of  inter- 
est" agreements  and  trusts,  as  we  know  them  in  the 
United  States,  are  existent  in  Germany,  as  well  as  com- 
bines in  which  the  State  itself  participates,  whether  as 
partner  or  controller.  But  different  from  all  of  these 
is  the  cartel.  And  the  cartel — known  differently  as  "Kar- 
tell," "Syndikat,"  "Verband" — has  come  through  a 
process  of  evolution  and  had  become  a  very  different 


134  AMERICA  IN  WORLD  MARKETS 

thing  from  what  it  started  out  to  be  in  the  middle  of  the 
last  century. 

The  potash  syndicate  of  fifty  years  ago,  like  the  metal 
syndicates  of  that  period,  when  the  German  states  were 
not  yet  a  factor  in  world  commerce,  was  merely  a  union 
of  potash  producers  for  the  purpose  of  fixing  prices,  lim- 
iting production  and  ascribing  territory  to  the  members 
of  the  syndicate.  The  potash  syndicate  of  recent  years, 
as  the  American  fertiliser  companies  know  by  bitter 
experience,  was  a  very  different  kind  of  cartel,  as  it  had 
at  its  head  the  German  State,  and  as  its  aims  were  not 
commercial  alone,  but  political  to  a  high  degree.  It  was 
in  that  respect  typical  of  the  modern  German  cartel,  as 
also  in  the  fact  that  no  commercial  contracts  into  which 
it  entered  were  sacred  or  binding  beyond  the  rule  of  ex- 
pediency, since  it  always  considered  itself  free  to  break 
faith  on  the  pretext  of  the  State's  monopolistic  rights 
and  the  latter's  prerogative  of  violating  bargains.  Ger- 
man good  faith — "Deutsche  Treue" — went  by  the  board 
when  the  German  State  entered  as  a  partner  into  impor- 
tant German  industries. 

In  the  early  days  the  cartels  had  no  easy  time  of  it. 
They  were  denounced  for  stifling  competition  and  goug- 
ing the  consumer  by  artificially  keeping  up  prices.  The 
infant  industries  pleaded  for  a  chance  to  grow.  The 
cartels,  they  claimed,  were  "children  of  necessity."  The 
German  States  variously  tolerated  them,  legislated  against 
them,  or  half-heartedly  encouraged  them.  When  Prus- 
sia had  successfully  consummated  her  atrocious  plots 
against  Denmark,  Austria  and  France,  and  the  Empire 
was  formed  and  Germany  started  on  her  great  career  as 
an  industrial  State,  the  cartels  entered  on  a  new  phase. 
So  rapid  was  the  growth  of  the  industries  and  so  de- 


THE  GERMAN  CARTEL       "  135 

termined  was  the  German  policy  of  industrial  expansion, 
irrespective  of  the  temporary  question  of  supply  and 
demand,  that  means  had  to  be  found  to  take  care  of  the 
German  surplus  production  at  times  when  it  had  far 
exceeded  available  facilities  for  its  absorption.  It  was 
then  that  the  German  policy  of  dumping  came  into  being. 

The  cartel  was  the  parent  of  dumping — this  English 
word  has  now  been  adopted  into  all  the  languages  of 
Europe  to  indicate  specifically  the  German  policy  of  or- 
ganised underselling  in  foreign  markets.  A  bill  was  re- 
cently introduced  in  the  Italian  Chamber  of  Deputies 
with  the  short  title  "Antidumping,"  a  word  which  is 
self-explanator}''  in  every  European  country  to-day.  The 
German  cartel  of  this  period  was  a  combine  within  an 
industry  to  safeguard  the  home  market  by  throwing  ex- 
cess production  on  foreign  markets.  In  some  cases  the 
cartel  had  a  selling  organisation,  a  "Verkaufs-Bureau," 
which  undertook  the  disposal  of  the  surplus  product,  and 
in  others  the  members  of  the  cartel  individually  sold  their 
own  product  in  the  territory  allotted  to  them,  at  the  price 
fixed  and  in  the  quantity  predetermined.  As  there  was 
no  general  inclination  to  rely  on  the  good  faith  of  the 
individual  members,  arrangements  were  made  for  spy- 
ing on  their  operations  and  fines  and  penalties  were  fixed 
for  violations  of  the  prescriptions  of  the  cartel. 

Sometimes  the  spies  and  "inspectors"  were  bribed  and 
the  seller  found  it  to  his  financial  advantage  to  pay  the 
fines  and  sell  more  than  his  share  or  at  higher  prices 
than  those  fixed,  and  then  the  cartel  levied  heavy  penal- 
ties, or  invoked  the  power  of  the  State,  or  saw  itself  dis- 
organised or  disrupted.  Honest  adherence  to  the  rules  of 
the  cartel  was  not  always  in  evidence,  but  German  dis- 
cipline usually  prevailed  and,  while  occasionally  a  big 


186         AMERICA  IN  WORLD  MARKETS 

concern  like  Krupps  sidestepped  the  cartels,  or  a  man 
like  August  Thyssen  broke  away  and  became  a  coal,  iron, 
railway  and  shipping  syndicate  all  in  himself,  the  gen- 
eral run  of  the  German  producers  of  the  elementary 
products  of  the  kind  suitable  for  syndication  were  kept 
in  line  and  the  cartels  grew  in  importance  with  the  in- 
dustrial growth  of  Germany. 

The  State  was  not  yet  wholly  with  them,  for  the  Ag- 
rarians, an  integral  part  of  the  autocratic  government, 
were  still  resentful  of  all  special  favors  for  the  indus- 
trial party.  The  Military  Party,  however,  finally  were 
brought  around  to  the  view  that  the  spread  of  German 
dominion  over  the  world  depended  no  less  on  economic 
penetration  abroad  than  on  victories  by  Germany's 
armies  in  the  field,  and  from  that  time  on  there  was  as- 
sured to  the  cartels  all  the  weight  of  government  backing. 
The  cartel  was  revealing  itself  as  a  potent  weapon  for 
commercial  expansion  in  a  way  that  had  not  been  fore- 
cast for  it  in  earlier  days.  The  trade  colleges  and  the 
commercial  universities  were  working  out  the  Great  Gen- 
eral Staff  problems  for  the  commercial  campaigns  for 
conquest  of  the  world's  markets.  The  cartel  loomed 
up  as  among  the  most  efficient  means  of  giving  assured 
results  to  this  end — the  cartel  renovated,  improved,  mod- 
ernised. It  offered  the  means  of  crushing  ruthlessly, 
relentlessly,  brutally,  the  competition  of  rival  commer- 
cial powers. 

The  old  cartel,  whose  members  represented  only  a 
section  of  an  industry,  syndicating  only  a  limited  part  of 
their  own  product,  was  dead.  The  new  cartel  was  as 
different  from  it  as  the  power  vehicle  of  to-day  from 
the  ox-waggon  of  a  past  century — an  organisation  with 
a  complex  intertwining  of  banks  and  of  industries  co- 


THE  GERMAN  CARTEL  137 

related  with  the  industry  forming  the  object  of  the  Ver- 
band,  and  with  the  State  and  its  controlled  organisms 
taking  a  direct  and  active  interest. 

A  proving  ground  was  at  hand  for  the  theories  of  the 
German  professors  of  commercial  science.  Italy,  a  new 
nation  without  a  developed  industrial  and  commercial 
life,  was  a  fallow  field  for  the  Germans  to  try  out  their 
schemes  for  commercial  conquest.  And  the  schemes 
worked.  The  German  cartels  crushed  all  opposition. 
Their  approach  to  the  market  which  they  decided  to  in- 
vade was  methodical  and  thoroughly  organised. 

No  sacrifice  in  underselling  was  considered  too  great, 
no  labor  too  arduous  once  the  task  was  undertaken  of 
securing  exclusive  position  in  Italy  for  a  given  series  of 
German  products.  The  task  was  all  the  easier  because 
the  risks  and  incidental  losses  fell  only  in  small  measure 
on  the  cartel  interested  in  the  particular  case.  Suppose 
the  German  locomotive  industry  resolved  to  overwhelm 
American,  British  and  other  competition.  The  cartels 
in  that  industry  decided  on  the  prices,  considerably  below 
cost,  that  would  certainly  get  the  business,  and  the  whole 
organisation  of  co-ordinated  cartels  was  notified.  Those 
of  coal,  steel,  iron  and  the  other  industries  that  supplied 
materials  to  the  locomotive  factories,  were  instructed  to 
make  to  the  latter  a  reduction  allowance  on  the  materials 
entering  into  the  locomotives  for  Italy  proportionate  to 
the  reduction  of  price  which  it  had  been  necessary  to 
make  to  win  the  Italian  market.  The  arrangements  for 
the  allowance  would  be  arranged  by  the  Abrechnungstelle, 
a  special  accounting  bureau  for  the  cartels.  The  German 
banks  would  finance  the  transaction,  the  German  am- 
bassador in  Rome  would  attend  to  the  introductions,  the 
German  Government  would  carry  all  shipments  free  on 


138         AMERICA  IN  WORLD  MARKETS 

the  State  railways  and  would  pay  on  the  exported  loco- 
motives a  special  export  bounty  far  in  excess  of  the  two 
marks  per  lOO  kilograms  which  it  allowed  on  manufac- 
tured metal  products  made  in  Germany  and  sent  abroad. 

The  locomotive  transaction  was  worked  by  the  Ger- 
mans even  in  France.  In  the  whole  operation  it  was  not 
so  much  the  locomotive  Verband  that  was  carrying 
through  a  deal ;  it  was  the  German  government  that  was 
imposing  German  locomotives  on  foreign  markets — with 
all  urbanity  of  method,  of  course,  but  with  the  exercise 
of  all  its  influence  and  by  the  use  of  all  the  resources  at 
its  command. 

The  whole  German  State  was  taxed  to  further  the 
economic  invasion  of  foreign  markets  through  dumping 
by  the  cartels.  The  home  market  for  the  product  which 
was  being  dumped  was  closed  and  carefully  protected 
against  the  outsider,  and  the  cartel  interested  was  author- 
ised to  raise  temporarily  its  home  prices.  When  German 
locomotives  were  being  sold  below  cost  in  Spain  the  State 
agreed  to  an  increase  in  price  on  a  corresponding  number 
of  locomotives  to  be  delivered  to  the  German  railroads. 

German  industrial  machinery  and  machine  tools  are 
ahnost  in  their  entirety  an  imitation  of  American  ma- 
chines and  tools,  frequently  in  violation  of  American 
patent  rights,  and  almost  invariably  they  are  a  very  in- 
ferior product,  yet  Germany  before  the  war  was  selling 
to  France  more  than  five  times  as  much — in  money  value 
— machinery  and  machine  tools  as  was  the  United  States. 

Dumping  extended  to  agricultural  products  as  well  as 
to  manufactures.  Germany  with  a  grain  production  in- 
sufficient for  her  own  requirements,  was  actually  a  heavy 
exporter  of  grain  and  flour.  The  German  importer  of 
grain   received   from  his  government  a  certificate,   an 


THE  GERMAN  CARTEL  139 

"Einfuhrschein,"  which  represented  the  duty  he  had  paid 
on  the  grain  he  had  imported,  which  duty  would  be  remit- 
ted in  case  he  exported  grain  or  cereals  that  would  bear 
import  duties  of  equal  value  if  imported.  The  certificates 
were  transferable  and  negotiable  and  were  traded  in  on 
the  grain  and  produce  exchanges  of  Germany.  The  dif- 
ference between  prices  on  the  home  market,  less  the  im- 
port duty,  and  prices  on  the  foreign  market,  often  fur- 
nished a  basis  for  profitable  transactions,  but  the  chief 
value  of  the  system  was  that  it  penalised  the  foreign 
source  of  supply  to  Germany  and  permitted  the  Germans 
to  assume  a  measure  of  control  on  the  foreign  product,  to 
the  extent  that  Germany  controlled  several  of  the  mar- 
kets of  northern  Europe  in  flour  made  from  wheat  grown 
in  Russia. 


CHAPTER  VI 

THE  "chain"  method  OF  EXPANSION 

Concentration  of  Industries  Facilitated  Expansion 
Abroad — Germany  Controlled  Foreign  Enterprises 
through  a  Minority  Interest — Great  Corporations 
Started  a  "Chain"  Which  Constantly  Lengthened^ 
How  Local  Owners  Were  Ousted  from  Own  Proper- 
ties— The  "Chain"  in  Italy,  Spain,  France  and  Other 
Countries. 

Before  the  war  the  great  German  corporations  had 
not  aimed  at  eliminating  competition  entirely.  In  the 
neighborhood  of  Frank fort-on-Main,  of  Mannheim,  of 
Ludwigshaven,  the  big  members  of  the  dye-stuffs  com- 
bine, the  Farbewerke  Hoechst,  Leopold  Casella,  the  Bad- 
ische  Gesellschaft,  allowed  a  number  of  small  plants  to 
flourish  unmolested,  handling  specialties  in  aniline  prod- 
ucts which  were  not  important  enough  to  bother  with,  or 
working  under  new  processes  that  had  not  been  developed 
to  the  point  where  the  big  concerns  desired  to  take  them 
over.  Small  independent  companies  were  also  engaged 
in  shipping  on  the  Rhine  and  other  rivers  and  canals  and 
in  the  Baltic,  and  there  were  also  small  firms  in  the  coal, 
steel  and  iron  and  electric  industries,  in  the  import  and 
export  business,  and  even  in  businesses  subsidiary  to 
arms  and  munitions  production. 

At  least  a  pretence  of  encouraging  competition  was 
in  recent  years  the  policy  of  the  German  State,  which  in 

140 


THE  "CHAIN"  METHOD  OF  EXPANSION   141 

this  regard  had  passed  through  many  stages  of  relation- 
ship to  the  combines  and  cartels  or  syndicates  and  the 
public  who  dealt  with  them.  In  recent  years  it  was  play- 
ing the  double  part  of  protector  of  the  oppressed  and  at 
the  same  time  patron  and  partner  in  the  great  oppressive 
combinations. 

The  war,  to  a  large  extent,  swept  aside  the  policy  of 
pretence,  for  the  State  ceased  to  act  merely  as  a  partner 
in  the  combinations.  It  undertook  their  direction;  it 
forced  concentration  by  closing  smaller  factories  and 
transferring  their  machinery  and  their  operatives  to  the 
larger  plants. 

Into  the  lap  of  the  great  industrial  corporations  were 
poured  the  fat  contracts,  the  opportunities  for  huge 
profits,  power,  influence,  independence  of  restrictive  legis- 
lation. The  aristocrats  of  the  sword  and  of  the  land  had 
united  with  the  aristocrats  of  industry.  Leaders  of  the 
great  Reichstag  parties,  Militarists,  National  Liberals, 
Agrarians,  Centrists,  Social  Democrats,  were  part  and 
parcel  of  the  great  combines,  industrial,  commercial  and 
financial.  Krupps,  Bayer,  the  General  Electric,  Siemens- 
Schuckert,  the  Duisberg  Maschinenfabrik,  the  Daimler 
Motor  Company,  the  Deutsche  Waffen-und-Munitions- 
fabrik,  the  Deutsche  Bank,  the  Disconto  Gesellschaft,  the 
Hamburg-American  and  the  North  German  Lloyd 
Lines,  and  several  others  were  all  interlocked  and  par- 
ticipated in  by  those  governing  Germany.  All  business 
worth  having  was  theirs  for  the  taking.  Their  power 
over  the  resources  and  opportunities  of  the  German 
Empire  was  unlimited. 

In  the  great  industrial  combine  was  largely  vested  tlie 
civil  government  of  the  German  people  for  the  purposes 
of  the  war.     Among  the  members  of  the  combine  were 


142         AMERICA  IN  WORLD  MARKETS 

subdivided  important  functions  other  than  those  for 
which  their  corporations  more  specifically  existed — the 
direction  and  control  of  the  press,  the  acquisition  and  dis- 
tribution of  foodstuffs  and  other  necessities,  the  hand- 
ling of  raw  materials,  the  mobilisation  of  labor,  the  fix- 
ing of  wages,  the  decisions  on  taxations  and  financial  ar- 
rangements generally. 

Is  this  mighty  organisation  of  concentrated  adminis- 
trative and  industrial  power  to  be  continued  after  the 
:war?  It  was  planned  also  for  after-war  purposes.  What 
a  weapon  it  would  be  when  the  other  nations  had  relaxed, 
and  their  war  combinations  were  dissolved. 

How  influential  the  large  German  industrial  and  com- 
mercial combines  are  in  the  world's  commerce  is  only  in- 
adequately gauged  by  consideration  either  of  their  capi- 
talisation or  of  the  business  of  the  plants  which  are  con- 
ducted under  their  name.  German  business  has  been  suc- 
cessfully concealed  from  the  world  through  a  system  of 
co-ordination,  of  subsidiary  plants  and  companies,  which 
has  come  to  be  described  by  economists  as  the  "chain" 
method.  Furthermore,  the  Germans  cleverly  worked  out 
a  way  of  obtaining  control  of  important  corporations  in 
other  countries  without  having  a  majority  ownership  of 
them.  Thus  in  the  Oriental  Railway  Bank,  the  head 
office  of  which  is  in  Switzerland,  the  board  of  directors 
comprised  eight  Germans,  five  Swiss,  one  Frenchman, 
one  Belgian  and  one  Austrian.  This  important  financial 
institution,  which  was  generally  classed  as  being  Swiss 
and  not  German,  was  entirely  controlled  by  the  Germans 
and  was  conducted  in  the  interests  of  Germany.  In  like 
manner  industrial  corporations,  like  the  Aluminum  Com- 
pany of  Neuhausen,  which  had  on  its  board  eight  Ger- 
mans, six  Swiss  and  one  Austrian,  might  really  be  con- 


JHE  "CHAIN"  METHOD  OF  EXPANSION   143 

sidered  German  corporations,  although  Switzerland  and 
other  countries  take  the  nominal  credit  for  their  exist- 
ence. 

The  German  "chain"  method  applied  principally  to 
corporations  that  were  started  from  Germany  itself.  The 
parent  corporation  undertook  the  establishment  of  a 
branch,  say,  in  Italy  or  in  Russia.  Through  German 
banks  it  contributed  part  of  the  capital,  the  rest  being 
obtained  from  local  sources,  and  this  branch  in  turn 
founded  other  branches  in  the  same  way,  the  Germans 
controlling  the  entire  "chain,"  although  the  business  was 
conducted  mainly  with  other  people's  money.  Where  a 
"chain"  had  been  established  competing  companies  of 
local  capitalisation  and  management  were  often  forced 
under  the  German  control.  By  acquiring  blocks  of  stock 
of  these  companies  in  the  open  market  the  Germans 
gained  a  right  to  a  share  in  the  management  and  then, 
through  pressure  from  affiliated  banks,  they  generally 
succeeded  in  taking  over  the  entire  direction.  As  they 
usually  supplied  also  the  latest  engineering  principles  and 
technical  skill  and  showed  the  ability  to  make  business 
increasingly  profitable,  they  readily  entrenched  them- 
selves in  possession. 

Signor  Negri,  founder  and  president  of  the  important 
Italian  electrical  establishment  which  bears  his  name,  told 
a  lamentable  story  before  a  court  martial  in  Genoa,  de- 
scribing how  the  Germans  secretly  bought  into  his  com- 
pany, gradually  Germanized  it,  and  finally  ousted  him 
from  any  share  in  the  control,  although  he  continued  to 
be  a  large  stockholder.  The  Grerman  corporation  which 
had  turned  this  trick  was  the  German  General  Electric, 
the  Allgemeine  Electricitats  Gesellschaft.  This  corpora- 
tion began  by  establishing  in  Zurich  a  "Bank  for  Elec- 


14f4.  AMERICA  IN  WORLD  MARKETS 

trical  Enterprises"  which  is  commonly  referred  to  as  the 
"Elektro  Bank"  of  Zurich.  It  has  \)een  proved  that  this 
bank  was  owned  by  the  German  General  Electric  and  the 
Deutsche  Bank.  It  founded  in  Genoa  the  Officine  Elet- 
triche  Genovesi,  the  Genoese  Electric  Plant,  which  com- 
pany in  turn  founded  the  Genoa  Electric  Tramway 
Union,  the  Electric  Power  Plant  of  Spezzia,  the  Adriatic 
Electric  Company,  which  serves  the  eastern  Italian  coast 
from  Friuli  to  Bari,  the  Electric  Company  of  Massa  Car- 
rara and  the  "Company  for  the  Development  of  Electric 
Enterprises  in  Italy." 

The  same  German  General  Electric  Company  estab- 
lished a  branch  company  in  Barcelona,  which  in  turn 
created  ten  companies  in  various  parts  of  Spain,  and  soon 
had  control  of  nearly  three-fourths  of  the  electric  power 
of  that  country.  It  also  bought  into  some  of  the  exist- 
ing light  and  power  plants  of  France  to  the  extent  that 
in  some  French  cities,  including  such  important  shipping 
centres  as  Nantes  and  Rouen,  it  had  obtained  control  of 
the  local  electric  plants. 

The  managing  directors,  engineers,  superintendents, 
cashiers,  auditors  of  all  these  companies  have  been  Ger- 
mans, frequently  disguised  as  "Swiss"  or  "Alsatians." 
In  name  the  subsidiary  companies  are  Italian,  Spanish, 
French  and  so  on.  For  legal  purposes  they  are  in  last 
resort  Swiss,  since  the  control  of  their  stock  is  owned  by 
a  bank  with  "social  domicile"  in  Switzerland.  It  is  no- 
body's business  in  international  law  that  this  Swiss  bank 
is  really  owned  in  Germany. 

Similarly  for  the  important  German  combine  of  elec- 
trical and  other  machinery  manufacturers  whose  principal 
name  is  Siemens-Schuckert.  This  concern  founded,  as 
its  chief  controlling  branch  for  Italy,  the  Societa  Italiana 


THE  "CHAIN"  METHOD  OF  EXPANSION   145 

di  Elettricita  Siemens-Schuckert  of  Milan,  which  rapidly 
established  subsidiary  branches  in  the  cities  of  Genoa, 
Naples,  Florence,  Palermo,  Alessandria,  Pisa  and  Per- 
ugia. Before  Italy  declared  war  on  Germany  all  business 
with  these  branches  was  conducted  directly  from  Berlin. 
Afterwards  the  relation  was  indirect,  through  a  con- 
trolled bank  in  Switzerland.  All  correspondence,  all  doc- 
uments and  all  reports  were  made  out  in  the  German 
language.  The  trail  of  the  Siemens-Schuckert  may  be 
followed  into  every  comer  of  the  globe.  The  S.  S.  Com- 
paiiia  Espafiola  de  Electricidad  and  the  S.  S.  de  La  Plata 
hide  the  obtrusive  Teuton  name  under  initials.  There 
are  more  or  less  disguised  Siemens-Schuckert  companies 
in  Belgium,  Denmark,  Russia,  Portugal;  in  the  cities  of 
Bucharest,  Cairo,  Chemulpo,  Han-kow,  and  in  innu- 
merable other  places. 

The  foreign  business  of  the  dye  and  chemical  indus- 
tries of  Germany  was  propagated  in  the  same  insidious 
manner.  The  Badische  company  owned  the  French  fac- 
tory at  Neuville-sur-Saone,  where  the  special  dye  was 
made  for  the  red  trousers  of  the  French  soldiers  and  from 
which  a  newspaper  campaign  was  conducted  against  the 
abolition  of  the  red  trousers.  Bayer  had  a  plant  at  Flers 
in  the  Nord  department;  the  Farbewerke  Hoechst  con- 
trolled the  Parisian  Company  of  Creil,  while  Casella  was 
owner  of  the  Lyons  Coloring  Materials  Factory.  In 
their  branches  in  France  the  Germans  carefully  avoided 
all  German  names  and  chose  French  titles  that  had  a  dis- 
tinctly patriotic  sound. 

In  most  foreign  countries  the  German  industrial  com- 
pany had  near  it  a  bank,  also  under  German  control,  al- 
though usually  the  German  interests  in  it  did  not  rep- 
resent a  majority  of  the  stock,  and  the  funds  with  which 


146         AMERICA  IN  WORLD  MARKETS 

the  bank  did  business  were  only  in  small  part  German. 
The  largest  commercial  bank  in  Italy  was  German, 

The  German  "chain"  method  applied  not  merely  to  the 
co-ordination  of  a  series  of  branch  establishments  under 
a  single  industry;  it  was  turned  to  account  also  by  com- 
binations of  German  industries  to  establish  subsidiary 
groups  of  industries  abroad.  It  was  by  this  use  of  the 
"chain"  that  Italy's  most  important  port,  Genoa,  was 
Germanised.  German  companies  penetrated  the  indus- 
tries, the  commerce  and  the  navigation  to  the  extent  that 
the  Pan-Germanists  openly  boasted  that  Genoa  was  the 
great  German  port  of  the  Mediterranean,  as  Trieste  was 
on  the  Adriatic  and  as  Rotterdam  was  at  the  mouth  of 
the  Rhine  and  as  Antwerp  was  for  the  Channel.  It  was 
through  the  "chain"  that  Germany  made  Italy,  Belgium 
and  Russia  her  economic  dependencies,  and  in  this  way 
also  Germany  was  becoming  the  chief  European  market 
for  many  essential  products.  Thyssen,  the  coal  and  iron 
magnate,  was  working  the  "chain"  as  an  individual,  when 
he  opened  iron  mines  in  Normandy  and  undertook  to  as- 
sume control  of  the  coal,  the  railways,  the  shipping  and 
other  services  of  the  French  coast  city  of  Caen. 


CHAPTER  VII 

CONCEALING  ECONOMIC  STRENGTH 

The  Foreign  Visitor's  Experience  at  Krupps — Keep-Out 
Signs  Elaborately  Courteous — German  Industries  Uo- 
der  Careful  Watch — Difference  of  American  Methods 
—-Development  of  Central  Europe  Carried  on  Quietly 
— Important  River  and  Canal  Works  and  Shipbuilding. 

Whoever  approached,  in  peace  times,  the  outer  pre- 
cincts of  the  great  Krupp  Works  at  Essen  soon  began  to 
be  intimidated — if  at  all  susceptible — by  the  "no  admis- 
sion" signs.  Huge  placards  bore  the  words  "Eintritt 
Verboten."  Behind  this  front  line  was  a  "Strengst  Ver- 
boten"  zone,  and  further  inward  a  frowning  barrier  of 
"Polizeilich  Verboten"  signs.  The  degrees  of  compari- 
son are  exhausted:  forbidden,  most  strongly  forbidden, 
forbidden  by  the  police. 

In  the  most  advanced  office  behind  these  lines  the  eye 
was  arrested  by  a  large  sign :  "Absolutely  no  admission 
to  any  part  of  the  works."  In  a  second  building,  to 
which  the  visitor  was  conducted,  the  most  conspicuous 
object  was  the  sign  on  the  wall :  "Visitors  will  please  be- 
lieve that  it  cannot  be  conceded  to  them  to  enter  any  part 
of  the  works."  The  director  whom  the  visitor  sought 
had  his  office  in  a  third  building,  and  on  the  wall  in  the 
waiting  room  a  large  framed  tablet,  hand-wrought  with 
red,  blue  and  gold  illumination,  made  announcement  to 
this  effect :  "We  would  gladly  show  our  friends  through 

147 


148         AMERICA  IN  WORLD  MARKETS 

the  works.  But  please  do  not  ask  to  visit  them.  If  you 
do,  you  will  put  us  to  the  unpleasant  necessity  of  telling 
you  that  this  is  absolutely  impossible.  We  beg  of  you  not 
to  subject  us  to  this  embarrassment." 

And  the  signs  meant  what  they  said.  The  visitor 
might  be  a  prospective  purchaser  of  field  guns  for  a  Cen- 
tral American  republic  and  have  satisfactory  credentials. 
He  will  be  shown  the  Krupp  exhibit  of  remote  model  77- 
millimetre  guns  that  are  for  sale  to  Central  American  re- 
publics, but  will  be  informed  with  gravity  and  courtesy 
that  into  no  part  of  the  Werke,  the  factory  proper,  can  he 
be  allowed  to  put  a  foot  without  a  special  permit  issued 
by  the  board  of  directors  convened  in  meeting,  and  that 
might  not  be  obtainable  for  weeks  or  even  months. 

At  Miihlheim  on  the  Rhine  there  is  an  important  steel 
and  brass  plant  which  one  may  have  reason  to  visit.  Fewer 
defensive  entanglements  bar  the  way  to  the  general  man- 
ager's outer  office,  but  once  arrived  there  the  visitor  is 
confronted  with  a  wall  sign  which  says,  "It  would  afford 
us  pleasure  to  show  our  friends  and  patrons  through  the 
works,  but  unfortunately  this  cannot  be  done.  Will  you 
be  so  good  as  to  spare  us  the  mortification  of  saying  this 
to  you  verbally,  by  abstaining  from  making  the  request?" 
Here  also  the  rule  is  adamant. 

You  go  to  Dusseldorf,  to  Dortmund,  to  other  centres 
in  the  beautiful  Westphalian  country,  over  wooded  hills, 
along  smiling  valleys,  at  times  in  a  region  that  recalls 
the  Naugatuck  Valley  in  Connecticut,  and  again  in  coun- 
try districts  that  have  a  charm  all  their  own,  to  the  peace- 
ful old-world  town  of  Altena,  on  a  river  at  the  bottom  of 
steep  hills,  to  Hohen-Limburg — for  all  the  world  like  a 
new  and  prosperous  little  American  town — to  Hagen,  to 
Hamm,  to  a  score  of  out-of-the-way  villages,  at  all  of 


CONCEALING  ECONOMIC  STRENGTH     149 

which,  to  your  growing  surprise,  you  find  nests  of  fac- 
tories •  furnaces,  steel  and  iron  plants;  brass,  tin,  and 
nickel  works,  wire  and  nail  plants  and  establishments  for 
{finished  metal  products  of  an  astonishing  variety  and 
modernity.  And  everywhere,  however  close  you  may  get 
to  the  proprietors,  you  find  a  variant  of  the  exaggeratedly 
polite  keep-out  sign — "We  would  gladly  show  you  the 
plant,  but  please  don't  ask  us,  because  it  will  hurt  us  so 
much  to  have  to  refuse." 

And  everywhere  you  will  be  conscious  of  an  all-seeing 
eye — not  obtrusively,  for  no  one  will  molest  you.  Neither 
will  any  one  make  friends  with  you.  If  you  happen 
inadvertently  to  speak  in  the  street  to  a  person  who  works 
in  a  factory,  you  may  see  signs  of  alarm  promptly  regis- 
tered, and  it  is  no  surprise  to  you  when  you  learn  that  all 
the  employes  of  all  the  factories  scattered  throughout 
this  whole  region  are  under  more  or  less  close  supervision. 
If  your  reactions  are  sensitive  you  become  gradually  con- 
scious of  being  within  the  web  of  the  German  spy  sys- 
tem over  industry  at  home.  If  you  know  how  to  investi- 
gate you  become  aware  that  that  spy  system  is  of  a  mili- 
tary kind. 

Once  in  a  while  a  manufacturer  in  the  Westphalia 
region  may  open  up,  to  a  limited  extent  and  for  his  own 
special  purposes.  Thus  on  one  occasion  in  one  of  the 
small  towns  above  mentioned  the  senior  partner  in  a 
high-grade  metal  plant  thought  he  saw  an  opportunity  to 
make  a  large  personal  gain  by  cutting  into  business  then 
handled  by  Americans.  The  allurement  was  great;  he 
became  communicative,  even  confidential.  Among  the 
concerns  with  which  he  was  then  doing  business  was  a 
noted  small  arms  factory  in  central  France — not  a  great 
distance  from  Lyons.     He  was  supplying  finished  parts 


150         AMERICA  IN  WORLD  MARKETS 

for  French  rifles  and  revolvers.  He  showed  documents 
to  prove  it.  He  had  taken  away  the  business  from  Ameri- 
can and  British  firms  and  he  had  a  way  of  disguising  the 
origin  of  the  parts.  He  revealed  the  information  as  evi- 
dence of  good  faith.  But  the  whole  thing  was  a  dead 
secret.  The  manufacturer  was  afraid  to  speak  aloud. 
Only  in  a  remote  corner  would  he  converse,  and  then 
nervously  and  in  whispers. 

It  is  hardly  necessary  to  emphasise  descriptively  the 
contrast  in  this  regard  between  the  German  way  and  the 
way  of  other  leading  nations.  It  will  be  remembered 
that  the  opening  of  the  war  in  19 14  drew  attention  to 
the  surprisingly  large  number  of  German  reservists  who 
were  in  the  United  States  for  the  purpose  of  studying  in- 
dustrial methods — German  manufacturers'  sons  and  other 
relatives  and  sons  of  German  factory  superintendents, 
over  on  business  ostensibly  of  more  advantage  to  America 
than  to  Germany.  For  the  most  part  reserve  officers  or 
under-officers,  they  were  primed  with  information  about 
the  war  and  its  coming  development  and  certain  outcome. 
Their  presence  in  individual  instances  was  regarded  as  a 
mere  coincidence  and  certain  manufacturers  laughed  aside 
any  suggestions  of  doubt  as  to  the  desirability  of  allow- 
ing these  German  experts  the  opportunity  of  familiaris- 
ing themselves  with  the  intimate  details  of  American 
manufacturing  methods.  These  Germans  were  good  fel- 
lows— a  little  brusque  perhaps — rough  diamonds — but 
they  could  never  begin  to  compete  seriously  with  Ameri- 
can manufacturers  if  the  latter  made  up  their  mind.  In 
other  countries  there  was  much  the  same  attitude. 

Germany,  while  spying  into  the  business  of  her  com- 
petitors, had  been  carefully  conducting  her  own  business 
under  cover.    It  is  well,  therefore,  to  bring  into  the  broad 


CONCEALING  ECONOMIC  STRENGTH     151 

light  of  day  that  which  the  Germans  have  been  at  the 
greatest  pains  to  conceal.  It  would  be  an  error  for 
America  to  remain  blind  to  the  facts  that  constitute  Ger- 
many still  a  menace  to  the  world's  independence. 

The  line  of  demarcation  between  military  and  trade 
warfare  is,  of  course,  hard  to  define.  The  one  merged 
into  the  other.  Germany  planned  to  win  the  war  in  two 
ways.  She  might  be  trounced  in  the  field  and  still  be 
victorious,  if  her  economic  campaign  were  not  set  at 
naught.  She  had  organised  to  pull  victory  out  of  one 
campaign  as  out  of  the  other. 

She  figured  that  if  the  worst  came  to  the  worst  in  a 
military  way,  she  could  still  be  victor,  the  war  might 
prove  to  have  been  well  worth  while. 

Let  us  look  through  the  eyes  of  the  German  leaders 
at  the  prospect  before  Germany.  Before  the  war  she 
was  hedged  in  in  a  way  to  stifle  her  Weltmacht  ambitions. 
Her  only  outlet  was  to  the  north  on  inland  seas.  Now 
she  had  a  chance  to  become  a  Mediterranean  power,  by 
absorbing  German  Austria,  her  territory  thus  sweeping 
the  centre  of  Europe  from  the  North  and  Baltic  Seas 
practically  to  the  Mediterranean  and  effectively  forming 
a  land  barrier  between  her  recent  foes  and  the  East.  Her 
$i,(XX),ooo,ooo  investment  in  Italy's  commerce  and  in- 
dustries is  only  partially  lost.  Her  great  investments  in 
other  countries  have  also  been  to  a  large  extent  safe- 
guarded^ through  prudent  foresight  in  putting  them 
under  the  laws  of  other  countries.  Her  factories  and 
agencies  in  neutral  countries  are  ready  to  pour  out  prod- 
ucts for  the  world's  markets.  She  has  accomplished  one 
of  her  great  war  aims  in  raising  a  bulwark  between  her- 
self and  Russia.    Russia,  if  she  can  hereafter  develop  as 


1S2         AMERICA  IN  WORLD  MARKETS 

a  whole,  may  be  forced  to  develop  eastward  as  an  asiatic 
power.  But  Russia  can  also  be  made  eventually  the  prac- 
tical dependency  of  Germany. 

German-Austrian-Hungarian  shipping  interests  met  in 
conference  at  Leipzig  and  later  at  Budapest  and  laid  the 
plans  for  the  new  waterway  development.  The  creation 
of  a  mighty  network  of  river  and  canal  lines  in  conjunc- 
tion with  the  Danube  is  to  be  the  outcome.  The  project 
of  uniting  the  Danube  with  the  Rhine  by  deep  water 
through  the  Neckar  and  the  Main  rivers  is  well  under 
way.  The  Elbe,  the  Oder  and  even  the  Vistula  and  the 
Dniester  are  to  be  joined  also  to  the  Danube.  Ships  of 
3,000  tons  are  to  be  taken  as  far  as  Budapest;  1,000-ton 
freighters  as  far  as  Ratisbon.  Seven-hundred-ton  boats 
now  reach  the  upper  Danube,  but  when  the  new  canal 
connections  are  completed  much  larger  vessels  will  be 
able  to  reach  the  North  Sea  from  the  Black  Sea.  The 
chief  freight  steamship  construction  in  German  shipyards 
during  the  war  was  for  Black  Sea  and  inland  river  serv- 
ice. How  can  England  and  Norway  hope  to  compete 
with  Germany  in  carrying  freight  from  the  Black  Sea  to 
northern  Europe?  The  present  ton-kilometre  cost  of 
carrying  freight  on  the  Danube  is  said  not  to  exceed  one- 
quarter  cent,  and  when  the  canal  system  and  river  de- 
velopment is  completed  it  is  expected  that  this  figure  may 
be  reduced  by  two-thirds.  We  hear  much  about  the  de- 
terioration of  the  German  railways,  but  practically 
nothing  about  the  development  of  the  waterways.  Yet 
they  have  been  of  vital  importance  in  enabling  Germany 
to  withstand  the  pressure  of  her  adversaries.  She  has 
cut  off  Russia  from  western  Europe.  She  hopes  to  bar 
out  the  United  States  and  Great  Britain  from  certain 


CONCEALING  ECONOMIC  STRENGTH     153 

regions.  Already  her  military  economic  campaign  among 
the  neutrals  of  Europe  in  promotion  of  the  "solidarity  of 
Continental  interests"  against  the  American  and  the 
Englishman  is  under  way. 


CHAPTER  VIII 

Germany's  banking  system 

Forced  Growth  of  German  Banking — Capital  Mobilised 
to  Catch  Up  with  Commercially  Older  Countries — 
Comparison  with  English,  French  and  American  Sys- 
tems— How  the  Six  Great  Banks  Grew — Government 
Representatives  Made  Directors — Oil  Stock  Promo- 
tions and  Bank  Rivalries — The  Grossbanken  and  the 
Great  Industrial  Corporations. 

Germany's  banking  system  is  the  most  modern,  the 
most  elastic,  the  most  enterprising  of  any  in  existence. 
Unhampered  by  old  traditions  of  conservatism,  it  grew 
along  new  lines  corresponding  with  the  growth  of  Ger- 
many as  a  State.  It  made  possible  Germany's  marvellous 
industrial  development  and  her  amazing  commercial  ex- 
pansion.   Such  is  the  German  view. 

England's  banking  system,  continued  on  old-fogy  prin- 
ciples, has  been  a  handicap  to  that  country — which  other- 
wise enjoyed  extraordinary  advantages — in  the  race 
among  the  nations  during  the  last  twenty  years.  France 
and  America — always  according  to  the  German  view — 
have  to  a  greater  or  less  extent  modelled  their  systems  on 
that  of  England. 

In  these  countries  the  banks  of  deposit  conduct  an  ex- 
tremely cautious  form  of  commercial  transactions,  cov- 
ering the  use  of  funds  with  bullion  and  with  sh5rt  notes 
backed  by  unequivocal  security,  while  giving  little  or  no 
return  to  the  mere  depositors  whose  funds  are  utilised  in 

154 


GERMANY'S  BANKING  SYSTEM  155 

the  transactions.  The  business  banks  and  credit  insti- 
tutions are  hardly  less  conservative,  furnishing,  confirm- 
ing or  extending  credit  where  credit  is  already  to  a  de- 
gree established  and  doing  nothing  for  new  development. 
The  inventive  genius,  planning  epoch-making  innovations, 
or  the  business  man  of  superior  acumen  and  energy  eager 
to  blaze  new  trails  and  conquer  new  worlds,  is  left  to 
compete  in  the  open  market  for  funds  with  the  wild-cat 
promoter  promising  fabulous  rewards  for  the  public's 
money,  which  the  policy  of  the  deposit  banks  has  failed 
to  draw  within  their  protection. 

In  Germany,  by  contrast,  the  banks  are  all  things  to 
all  men — deposit  banks  to  the  person  wishing  to  keep  his 
capital  liquid,  credit  banks  to  the  business  man,  and  pro- 
motion banks  to  those  seeking  capital  for  new  ventures 
or  for  greater  expansion.  The  wild-cat  promoter  can 
have  but  meagre  pickings  where,  as  in  Germany,  the  de- 
posit banks  commonly  pay  interest  to  depositors  of  six  or 
eight  per  cent  a  year.  Where,  as  in  Germany,  the  same 
deposit  banks  are  the  great  promotion  agencies  of  the 
State,  co-operating  with  the  Government  in  the  united 
effort  to  give  the  most  energetic  impulse  to  industry  and 
commerce,  to  national  wealth  and  well-being,  the  worries 
that  obsess  the  progressive  business  man  in  countries  like 
England,  France  and  the  United  States  regarding  credits 
and  bank  assistance  cannot  arise.  And  as  for  the  seer, 
the  man  with  visions,  the  man  with  the  big  ideas  and  keen 
judgment,  why,  in  a  country  like  Germany,  he  is  in  his 
seventh  heaven. 

How  would  Germany  have  fared  if  she  had  been  con- 
tent to  follow  the  old  snail-pace  financial  method  of  the 
countries  older  than  she,  commercially  speaking;  if,  lack- 
ing capital,  she  had  to  create  capital  progressively  to  jus- 


156         AMERICA  IN  WORLD  MARKETS 

tify  the  development  of  her  industries,  and  if  she  had  to 
insist  on  credits  being  established  by  her  manufacturers 
and  her  merchants  ahead  of  commercial  expansion  ? 

Germany  knew  that,  if  she  was  to  take  her  rightful 
place  quickly  among  the  leader  nations,  she  must  mobilise 
her  capital  for  intensive  use,  she  must  permit  her  banks 
to  offer  real  inducements  to  depositors,  she  must  build 
factories,  create  industries,  develop  credits,  exploit  the 
available  markets  and  open  new  markets  for  herself  and 
do  all  these  things,  not  in  orderly  progression,  but  at  the 
same  time  and  with  the  utmost  possible  energy.  To  effect 
this  result  her  banking  system  must  be  a  national  bank- 
ing system  in  the  truest  sense,  joining  in  the  risks,  aiding 
those  engaged  in  the  other  branches  of  the  endeavor,  re- 
lieving the  captains  of  industry  and  of  commerce  of  the 
burden  of  financial  worry.  Banking  must  not  remain 
aloof  but  must  be  the  handmaiden  of  industry,  transpor- 
tation, commerce,  agriculture,  science.  Germany's  new 
way  allowed  her  to  catch  up  with  those  who  had  a  long 
start  over  her.  It  showed  her  that  ultimate  supremacy 
was  hers,  if  only  the  other  nations  would  go  on  adhering 
to  their  old  banking  system. 

Such  is  the  view  of  Germany's  banking  system  held,  not 
merely  by  Germans,  but  by  not  a  few  business  men  in 
this  and  other  countries. 

The  Englishman  who  knows  his  side  of  the  business 
may  well  concede  many  of  the  German  claims.  And  then 
he  may  declare,  with  absolute  truth,  that  Germany's 
banking  system  led  to  the  present  world  war.  The  wild 
career  of  financial  development,  the  reckless  multiplying 
of  factories,  the  feverish  piling  up  of  products,  the 
struggle  for  the  markets,  had  caused  among  far-sighted 
men  everywhere  the  gravest  apprehensions  for  the  day 


GERMANY'S  BANKING  SYSTEM  157 

when  the  process  of  pyramiding  would  bring  its  inevi- 
able  consequences,  when  Germany  would  find  herself  face 
to  face  with  the  fact  that  the  other  nations  would  resist 
her  violent  invasion  of  their  rights,  that  the  Wirtschafts- 
Krieg  which  in  her  drunken  frenzy  she  had  told  herself 
would  give  her  victory  and  commercial  dominion,  was 
leading  her  to  the  war  of  blood.  Her  pyramid  was  tot- 
tering, her  banking  bubble  was  at  the  bursting  point 
when  in  the  summer  of  1914  she  decided  to  invoke  the 
supreme  gage  for  final  and  permanent  success.  Huge 
enterprises  had  been  created  with  an  insufficiency  of  capi- 
tal behind  them.  The  German  banks  were  responsible 
for  the  economic  crime. 

The  Frenchman  might  answer  that  it  was  from 
France  that  Germany  learned  the  elasticity  and  enter- 
prise of  modern  banking,  that  the  Credit  Mobilier,  estab- 
lished in  the  middle  of  the  last  century,  was  the  model  of 
the  new  bank  combining  many  functions;  that  banks  of 
the  kind  had  multiplied  in  France  and  that  Germany, 
after  copying  the  model,  had  developed  its  risky  features 
while  neglecting  the  safeguards  that  were  designed  to 
counteract  them. 

The  American  business  man  need  not  bother  with 
German  criticism  of  his  country's  banking  institutions. 
He  would  not  submit  to  the  ignominy  which  the  German 
system,  in  practice,  involved — the  loss  of  the  individual's 
freedom,  the  right  of  the  bank  to  spy  into  his  most  inti- 
mate affairs,  the  opportunity  which  he  must  put  in  the 
bank's  hands  of  blackmailing  him  and  otherwise  putting 
the  screws  on  him  for  political  and  other  purposes.  The 
American,  however,  like  men  in  other  countries,  will 
realise  that  Germany,  by  putting  to  the  concrete  test 
theories  that  had  long  been  the  subject  of  much  specula- 


168         AMERICA  IN  WORLD  MARKETS 

tive  discussion,  has  furnished  an  object  lesson  of  the  most 
valuable  kind. 

He  will  wonder  whether  the  change  which  Germany's 
war  had  forced  on  our  banking  methods — a  concentration 
of  the  nation's  financial  resources  effected  toward  one 
sole  end,  with  a  liberality  of  credit  for  all  that  tended  to 
the  prosecution  of  the  war  and  a  parsimony  for  all  else 
— may  not  lead  to  new  methods  in  our  banking  policy,  an 
abandonment  of  some  of  the  old  notions  of  conservatism 
and  aloofness,  a  union  of  interest  in  promoting  the  great 
causes  of  the  nation,  a  closer  contact  with  the  people  and 
sympathy  with  its  legitimate  desire  for  greater  consider- 
ation for  the  cash  it  has  to  protect  for  the  common  good, 
whether  as  deposits  or  as  investments. 

The  great  German  banks  came  into  being  simultane- 
ously with  the  industrialisation  of  Germany.  In  1848  the 
Schaaffhausen'scher  Bankverein  of  Cologne  was  organ- 
ised; in  185 1  the  Bank  fur  Handel  und  Industrie  (the 
Darmstadter  Bank) ;  in  1856  the  Berliner  Handels-Ge- 
sellschaft  and  the  Mitteldeutsche  Creditbank;  in  1872  the 
Dresdner.  Banks  less  well  known  to-day,  private  banks 
and  banks  of  issue  and  a  multitude  of  institutions  of  the 
Credit  Mobilier  type  were  also  founded  in  that  period,  the 
third  quarter  of  the  nineteenth  century. 

With  the  development  of  German  industry  and  com- 
merce the  weaker  banks  were  systematically  crowded  out 
of  existence  by  the  bigger  ones.  Crises,  crashes,  panics 
benefited  the  big  banks.  The  depositors  turned  away 
from  the  smaller  concerns  and  placed  their  money  for 
djCposit — ^practically  for  investment — with  the  rapidly 
growing,  well-advertised  industrial  banks.  And  these  big 
concerns  certainly  knew  how  to  advertise.  They  con- 
trolled newspapers  and  periodicals,  news  and  advertising 


GERMANY'S  BANKING  SYSTEM  159 

agencies  native  and  foreign  and  gained  tremendous  pres- 
tige at  home  and  abroad.  But  they  made  no  place  in  the 
sun  for  their  smaller  competitors,  and  the  latter  had  al- 
most invariably  to  come  to  terms.  The  Deutsche  Bank 
took  in  fifty  other  banks,  the  Dresdner  Bank  nearly  as 
many,  the  Disconto  more  than  thirty. 

Some  of  the  absorbed  banks  were  wiped  out,  others 
continued  as  branches,  still  others  apparently  as  autono- 
mous banks,  but  under  the  direction  of  officials  appointed 
by  the  big  bank.  The  latter  paid  in  stock  for  outright 
acquisition,  or  for  control,  of  the  smaller  bank,  increasing 
its  own  capitalisation  for  the  purpose  and  then  increasing 
the  stock  of  the  subsidiary,  in  order  to  swap  part  of  it 
for  stock  of  other  small  banks  to  be  brought  into  the 
fold.  Thus,  under  the  prestige  of  highly  advertised 
names,  half  a  dozen  big  banks,  or  rather  groups  of  banks, 
working  a  complex  game  of  swapping  and  kiting,  of  in- 
flation of  values,  of  creation  of  "capital,"  assured  to  them- 
selves the  financial  control  of  the  industries  and  com- 
merce of  Germany.  More  than  that;  they  gained  a 
powerful  grip  on  industry  and  finance  in  foreign  coun- 
tries. Sometimes  the  big  groups  united  among  them- 
selves in  a  banking  cartel  or  in  a  community  of  in- 
terest agreement  for  special  industrial  development  or 
for  other  reason,  or  in  a  Consortium  for  a  particular 
transaction. 

Occasionally  in  recent  years  the  big  groups  engaged  in 
rather  bitter  rivalry  among  themselves,  and  bickerings 
arose  when  one  group  seemed  to  be  stealing  a  march  on 
the  others.  The  Deutsche  Bank  was  a  notorious  offender 
in  this  regard,  and  was  accused  of  not  playing  fair.  While 
operating  in  an  Interessen-Gemeinschaft  with  the  Dresd- 
ner Bank  to  get  control  of  the  Bergisch-Markische  Bank 


160  AMERICA  IN  WOULD  MARKETS 

of  Elberfield,  it  had  played  a  shabby  trick  on  the  Dresdner 
and  had  gobbled  up  the  Bergisch-Markische  Bank  with 
the  latter's  score  of  subsidiaries  for  itself,  and  had  thus 
won  an  important  measure  of  financial  domination  in  the 
great  steel  and  iron  and  coal  industries  of  Westphalia. 
This  was  several  years  ago,  but  the  transaction  had  not 
been  forgotten  and  as,  in  the  years  immediately  before 
the  war,  the  Deutsche  Bank  had  carried  out  some  other 
high-handed  acts,  the  Dresdner  planned  one  grand  coup 
to  discomfit  its  rival.  This  was  no  less  than  the  acquisi- 
tion of  the  Schaaffhausen  Bank,  itself  one  of  the  big 
groups.    The  war  came  to  restore  harmony. 

The  Deutsche  had  also  put  through  some  deals  that 
exasperated  the  Disconto  Gesellschaft.  With  the  latter 
it  had  gone  into  the  Roumanian  oil  fields;  but  while  the 
Disconto  was  plodding  along  quietly,  the  Deutsche  came 
out  with  a  whirlwind  campaign  of  oil  stock  promotion. 
The  shares  of  its  Roumanian  petroleum  companies,  cap- 
italised in  the  millions  of  dollars,  were  offered  to  the  con- 
fiding public  of  Germany  by  the  big  bank  that  was  under- 
stood to  have  "the  Government  behind  it."  Wild-cat  pro- 
moters of  oil  stocks  we  have  known  and  read  of  in  this 
country  were  amateurs  in  the  business  compared  with  the 
great  German  bank.  The  public  did  not  have  long  to 
wait  before  the  Roumanian  oil  bubble  was  punctured  and 
the  Deutsche  Bank  was  left  in  possession  of  the  Rouma- 
nian oil  fields,  costing  it  nothing,  and  with  the  public's 
money  in  its  coffers.  Then  there  occurred  a  diversion. 
The  Petroleum  Sales  Monopoly — the  main  purpose  of 
which  was  the  confiscation  of  American  property  and 
rights  in  Germany  and  in  contiguous  countries — was  an- 
nounced, and  the  Deutsche  Bank  was  to  have  the  leading 
part  in  financing  the  Monopoly. 


GERMANY'S  BANKING  SYSTEM  161 

"The  bankers  of  Germany  will  not  stand  for  war." 
How  familiar  that  phrase  was  before  the  war  began. 
When  the  wise  and  the  far-sighted  used  to  tell  us  that 
Germany  was  planning  to  spring  a  war  on  the  whole 
civilised  world,  the  German  agents  were  always  there  to 
assure  us  that  war  could  not  be  made  without  the  bankers, 
and  that  the  German  bankers  would  not  tolerate  it.  How 
cynical  that  assurance  was,  when  the  "bankers"  in  con- 
trol of  the  financial  institutions  of  Germany  were  neither 
more  nor  less  than  docile  appointees  of  the  Government 
and  tools  of  the  Military  Party.  The  old-time  bankers 
of  the  country  might  not  have  stood  for  a  war  of  this 
kind,  but  the  old-time  bankers  were  long  out  of  the  way, 
as  far  as  having  the  chief  voice  in  deciding  the  financial 
policy  of  the  Empire.  They  had  either  been  absorbed 
with  their  banks,  or  they  had  been  reduced  to  a  position 
of  impotence.  It  was  clearly  with  a  view  to  the  war 
that  the  German  Government  had  not  merely  tolerated, 
but  aided  and  abetted,  the  formation  of  the  few  powerful 
groups  dominating  the  banking  situation  in  the  Empire 
and,  incidentally,  had  permitted  such  happenings  as  the 
Roumanian  oil  stocks  swindle  by  the  Deutsche  Bank,  on 
the  ground  presumably  that  the  common  people's  money 
might  not  otherwise  be  easily  reached  by  the  Government. 

The  old-time  bankers  despised  and  distrusted  the  new- 
comers whom  the  Government  had  placed  at  the  head  of 
the  powerful  groups  of  banks,  men  who  had  no  affiliation 
with  the  old  banks  of  Germany,  men  like  Helfferich,  von 
Kiihlmann,  von  Gwinner.  All  three  of  these  owed  their 
claim  to  Government  recognition  from  the  fact  that  they 
had  been  prominently  associated  with  Germany's  schemes 
for  world  domination.  All  three  had  lived  in  the  Near 
East,  associated  with  the  construction  and  the  direction  of 


162         AMERICA  IN  WORLD  MARKETS 

the  Anatolian  and  the  Bagdad  railways.  Von  Kiihlmann, 
in  fact,  was  born  in  Constantinople.  He  was  of  the 
chosen  type  of  German  Imperial  diplomat,  and  as  charge 
at  the  Embassy  in  London,  and  as  Foreign  Minister,  he  is 
understood  to  have  been  an  important  representative  of 
the  German  banking  system.  Helfferich,  the  most  influ- 
ential of  the  Deutsche  Bank  directors,  was  the  preor- 
dained Finance  Minister  when  the  war  came,  and  von 
Gwinner,  who  before  the  war  publicly  voiced  his  contempt 
of  the  banking  system  of  the  United  States  at  the  Ameri- 
can Chamber  of  Commerce  in  Berlin,  is  the  Deutsche 
Bank  director  in  control  under  the  new  "Republic." 

A  still  further  measure  of  unity  of  control  over  the 
German  groups  of  banks  was  obtained  by  special  legis- 
lation shortly  before  the  war,  giving  to  the  Reichsbank 
direct  supervision  over  the  assets  of  the  other  banks  and 
special  control  over  their  specie. 

It  was  the  new  industrial  movement  in  Germany  that 
had  brought  the  new-type  banks  into  existence,  but  when 
the  latter  developed  they  turned  the  tables  and  became  the 
owners  or  the  directors  of  many  of  the  industries  that 
had  created  them.  The  concentration  of  German  bank- 
ing brought  the  industries  and  commerce  of  the  Empire 
under  a  centralised  control.  The  domination  finally  ac- 
corded on  the  eve  of  the  war  to  the  Reichsbank,  the  Im- 
perial institution  with  the  prerogative  of  note  issue  (the 
privilege  of  emission  is  still  retained  also  by  five  minor 
private  note  banks),  completed  and  perfected  the  union. 

While  each  of  the  six  big  groups  of  banks  specialised 
to  some  extent  in  the  class  of  business  it  controlled — 
the  Deutsche  in  electric  properties  and  North  German 
Lloyd  Steamship  Company ;  the  Disconto  in  foreign  rail- 
ways, steel  and  iron  and  Hamburg-American  Steamship 


GERMANY'S  BANKING  SYSTEM  163 

Company;  the  Darmstadter  in  light  railways  and  brew- 
eries; the  Handelsgesellschaft  in  metallurgical  works, 
and  the  Dresdner  and  Schaaffhausen  in  others — never- 
theless all  the  groups  were  interested  to  some  extent  in  all 
the  leading  industrial  groups.  The  big  bank  groups  had 
seen  to  it  that  the  chief  industries  were  also  concentrated 
into  groups.  Thus  in  the  electrical  business  there  were 
six  groups  of  companies  under  the  following  names: 
Siemens  and  Halske,  General  Electric,  Schukert  Union, 
Helios,  Lahmeyer  and  Kummer.  An  indication  of  the 
banking  affiliations  of  these  groups  may  be  gathered  from 
the  fact  that  Siemens  and  Halske  were  backed  by  the 
following  banks :  Deutsche,  Darmstadter,  Berliner  Han- 
delsgesellschaft, Disconto,  Dresdner,  Mitteldeutsche, 
Bleichroeder,  Delbriick,  Stern,  Speyer-Ellissen. 

And  similarly  for  the  groups  in  the  chemical  industries 
and  in  the  industries  with  strong  cartel  tendencies,  such 
as  mining  and  metal  working.  The  German  Govern- 
ment's grip  on  the  financial,  industrial  and  commercial 
resources  of  the  Empire  was  thus  complete  to  wield  them 
at  will  and  as  one  mass  in  its  plans  for  the  prosecution 
of  war  and  of  world  domination. 

An  account  of  the  methods  by  which  the  great  groups 
of  German  banks  spread  their  branches  abroad  and 
through  them  used  the  resources  of  the  foreign  countries 
to  build  up  German  commercial  power,  as  well  as  of  the 
methods  adopted  by  the  German  banks  for  keeping  in 
subjection  those  who  deal  with  them  and  for  obtaining 
the  foreigner's  trade  secrets,  is  worth  special  consider- 
ation. 


CHAPTER  IX 


GERMAN  BANKS  ABROAD 


Economic  Theory  of  the  Foreign  Bank — Characteristics 
of  the  German  Banks  Abroad — Value  of  State  Direc- 
tion— Prestige  of  the  German  Great  Banks  Utilised — 
Banks  Founded  with  the  Foreigner's  Money — Silent 
Partnership  Arrangement  with  American  Banking 
Houses — Experiences  of  American  Business  Men  Who 
Dealt  with  Them — Even  Blackmail  Resorted  to — The 
Banking  Web  Around  the  World. 

Germany's  banks  in  foreign  countries,  her  most  potent 
weapon  for  dominating  foreign  markets,  were  the  van- 
guard of  her  "economic  war"  forces  setting  out  for  com- 
mercial dominion  of  the  world.  Starting  on  her  industrial 
career  without  the  accumulated  capital  of  countries  like 
England  and  France,  without  the  natural  resources  of  the 
United  States,  Germany,  by  unusual  methods,  came  to  be 
a  financial  power  of  the  very  first  magnitude. 

London  was  the  financial  capital  of  the  world,  and  then 
New  York  gradually  drew  up.  Wall  Street  was  pitted 
against  "The  City."  Statistics  used  to  be  quoted  to  show 
that  Wall  Street  was  forging  ahead,  and  that  we  were 
about  to  have  the  supreme  satisfaction  of  having  the 
world's  financial  capital  in  our  midst. 

Not  a  word  meanwhile  about  Berlin.  Berlin  craved 
no  notoriety  of  that  sort,  but  it  was  Berlin  that  was 
doing  the  chief   forging  ahead.     Germany  in  all  that 

164 


GERMAN  BANKS  ABROAD  165 

period  was  milking  for  her  own  purposes  The  City,  Wall 
Street,  the  Paris  Bourse,  the  accumulated  capital  of  Italy, 
Spain,  Holland  and  Belgium,  the  capital  of  Russia  bor- 
rowed from  France,  the  money  resources  of  South 
America  derived  from  the  United  States  and  other  coun- 
tries. 

Germany,  we  have  been  told  for  the  past  few  years, 
has  been  doing  no  foreign  business;  she  has  lost  her 
foreign  trade,  her  shipping;  she  has  piled  up  war  debts 
that  will  inevitably  leave  her  bankrupt;  she  will  be  set 
back  fifty  years  as  a  result  of  the  war.  Such  has  been 
the  average  forecast.  But  talk  of  this  kind,  while  it  may 
give  some  empty  satisfaction,  can  do  no  good.  Actually 
it  is  worse  than  useless,  for  it  is  founded  on  ignorance  of 
the  strength  of  Germany's  financial  structure,  both  at 
home  and  abroad.  It  would  be  of  far  greater  benefit  to 
the  people  of  this  country,  and  to  the  peoples  of  the  other 
countries  striving  for  freedom,  to  tell  them  frankly  that 
there  is  a  real  danger  of  Germany  being  better  off  finan- 
cially in  the  future  than  most  of  her  present  adversaries, 
unless  they  all  grasp  the  deadliness  of  the  "economic 
war,"  the  Wirtschafts-Krieg,  which  Germany  for  years, 
and  in  the  most  crafty  manner,  has  been  waging  against 
them,  and  unless  they  undertake  some  radical  counter 
measures. 

"The  German  bank  abroad  is  the  means  of  introducing 
the  German  element  into  every  foreign  field  of  enterprise. 
It  is  the  wedge  that  opens  the  way  to  economic  penetra- 
tion of  the  world's  markets."  This  is  an  axiom  of  the 
German  business  universities.  Another  is  to  this  effect: 
"To  make  a  foreign  nation  your  debtor  is  to  put  it  in  the 
obligation  of  paying  to  you  tribute — political,  financial, 
commercial.     It  is  to  make  it  ultimately  your  vassal 


166         AMERICA  IN  WORLD  MARKETS 

state."  Germany  had  made  many  nations  her  debtors, 
her  economic  vassals.  Not  all  of  them  have  been  freed 
from  their  bondage. 

With  thoroughness  and  with  military  precision  the 
Germans  went  about  the  task  of  using  their  banks  abroad 
as  the  opening  wedge  for  German  supremacy.  The  citi- 
zens of  other  countries  have,  of  course,  established  banks 
abroad,  and  no  one  could  deny  to  the  Germans  an  equal 
right  to  do  so.  But  it  happens  that  there  is  the  widest 
kind  of  a  difference  between  the  banks  set  up  by  the  Ger- 
mans and  those  established  by  the  other  peoples  in  for- 
eign lands.  In  the  case  of  the  latter  the  banks  are  private 
in  every  sense  of  the  word.  In  the  case  of  the  Germans 
the  banks  are  practically  and  in  effect  banks  of  the  Ger- 
man State.  It  is  the  German  Government  that  is  arriv- 
ing in  your  midst  every  time  that  a  German  bank  is 
established  in  your  country.  This  difference  is  of  vital 
importance. 

The  majority  of  the  German  banks  abroad  were 
founded  by  the  Grerman  Grossbanken,  the  "great  banks," 
the  six  big  groups  into  which  the  German  "credit"  or 
business  banks  were  concentrated,  the  groups  known  as 
the  Deutsche  Bank,  Disconto  Gesellschaft,  Berliner  Han- 
delsgesellschaft,  Dresdner  Bank,  Schaaffhausen'scher 
Bankverein  and  the  Darmstadter  Bank.  They  are  State 
banks,  even  by  the  admission  of  German  official  spokes- 
men, like  Dr.  Helfferich  and  Jacob  Riesser,  Germany's 
chief  authority  on  banking.  The  latter  dilates  compla- 
cently on  the  advantages  that  derive  to  Germany  from  the 
fact  that  the  great  banks  are  directed  by  the  State.  "State 
direction,"  he  says,  "makes  of  the  banks  a  united  force 
for  furthering  the  national  interest  at  home  and  abroad,, 
for  elaborating  an  industrial  policy,  for  establishing  colo- 


GERMAN  BANKS  ABROAD  167 

nies  and  developing  foreign  trade,  for  creating  or  acquir- 
ing means  of  transportation  and  communications — rail- 
roads, shipping,  canals,  cables,  radio  stations — for  con- 
trolling the  press  and  public  opinion,  for  upholding 
national  credit,  for  obviating  crises  and  preventing 
panics." 

And  so,  when  a  German  bank  is  established  abroad,  it 
is  the  German  State  that  is  penetrating  into  the  foreign 
country  to  control  the  press  and  public  opinion,  to  fur- 
ther Germany's  national  and  industrial  policy,  to  estab- 
lish colonies,  transportation,  communications.  Nowa- 
days the  German  banks  abroad  do  not  hoist  the  German 
ensign.  In  fact  they  are  not  always  easy  to  recognise. 
Some  ten  years  ago  the  Germans  began  to  adopt  the 
policy  of  disguising  to  some  extent  their  banks  abroad, 
dropping  any  appellation  that  would  indicate  their  alH- 
ance  with  the  German  State,  using  domestic  names,  often 
patriotic  titles.  This  was  particularly  the  case  in  France, 
England  and  the  United  States. 

The  Deutsche  Bank  some  twenty-eight  years  ago  or- 
ganised in  the  United  States  the  German- American  Trust 
Company  and  located  here  a  branch  of  the  Deutsche 
Ueberseeische  Bank,  the  German  Overseas  Bank.  The 
parent  German  bank  became  a  weighty  factor  in  spec- 
ulation in  American  railway  shares,  and  particularly  in 
those  of  the  Northern  Pacific  Railroad  Company,  but 
in  the  course  of  time  it  changed  its  method  of  doing  busi- 
ness, at  least  outwardly.  The  trust  company's  name  was 
changed  to  the  German  Trust  Company,  and  it  was  an- 
nounced that  it  would  thereafter  devote  itself  chiefly  "to 
studying  the  condition  and  accounts  of  American  cor- 
porations and  to  undertaking  trustee  operations" — a 
rather  odd  line  of  activity  for  a  foreign  bank  in  Amer- 


168  AMERICA  IN  WORLD  MARKETS 

ica.  The  Deutsche  Bank,  the  Disconto  and  the  other 
great  German  banks  now  began  to  operate  in  the  United 
States  largely  through  private  banks  and  in  the  name  of 
the  latter. 

As  far  back  as  1872  the  Deutsche  Bank  had  entered 
into  Kommandite,  or  "silent  partnership,"  with  a  New 
York  house  of  German  origin,  and  this  method  was 
pursued  on  an  ever-increasing  scale  in  the  past  couple  of 
decades  by  the  big  German  groups.  Disguised  under  the 
name  of  a  private  bank,  they  directed  the  huge  German 
industrial  and  commercial  army  of  invasion  in  the  United 
States,  creating  for  Germany  commercial  assets  which 
the  Alien  Property  Custodian  declared  were  represented 
by  billions  of  dollars. 

Any  American  who  did  business  of  considerable  mag- 
nitude with  the  German  banking  concerns  here  was  soon 
initiated  into  the  German  method  of  commercial  banking. 
He  had  to  lay  open  to  the  concern  all  details  regarding 
his  business,  his  clientele,  his  manufacturing  processes, 
as  well  as  all  information  concerning  his  particular  branch 
of  industry  or  trade  throughout  the  United  States;  he 
had  to  admit  the  agents  and  accountants  of  the  German 
banking  concern  to  his  factory,  his  place  of  business,  his 
books;  he  had  to  agree  to  use  the  accommodation  re- 
ceived solely  in  the  way  indicated  to  him — in  other  words, 
for  the  benefit  of  German  industry  and  commerce.  Then 
he  received,  not  cash,  but  the  banking  concern's  note,  at 
a  high  rate  of  interest,  and  usually  with  a  commission 
charge  tacked  on,  and  this  note  he  discounted  at  an 
American  house.  Often  he  had  to  accept  German  counsel 
or  direction  in  the  conduct  of  his  business,  or  to  take 
Germans  into  his  employ.  German  banking  in  America 
was  not  only  an  eminently  profitable  business  as  mere 


GERMAN  BANKS  ABROAD  169 

banking;  it  was  also  the  means  of  enabling  German  in- 
dustry and  commerce  to  grow  prodigiously,  practically 
on  credit,  and  almost  solely  by  the  use  of  American 
money. 

The  six  big  German  banks  also  entered  into  deals  and 
community-of -interest  agreements  for  certain  specific  fi- 
nancial transactions  or  for  a  course  of  business  with 
American  banking  firms  known  for  generations  to  be 
purely  American.  A  vast  business  was  also  done  by  them 
openly  and  directly  with  our  national  banks  and  trust 
companies.  Many  of  the  banks  handling  this  business, 
as  a  tribute  of  courtesy,  admitted  a  number  of  German 
clerks  into  their  service.  In  this  connection  it  has  been 
remarked  as  noteworthy  that  the  foreign  exchange  clerk, 
as  well  as  the  foreign  correspondent,  in  almost  every 
bank  of  importance  in  every  large  city  and  in  every  nook 
and  corner  of  the  globe  was  a  German.  The  fact  might 
be  accepted  as  merely  testifying  to  the  high  efficiency  of 
the  German  as  a  bank  clerk,  were  it  not  that  investiga- 
tion has  revealed  that  devious  ways  had,  in  many  cases, 
been  adopted  to  get  the  German  into  the  post  and  that 
in  many  other  cases  the  clerk's  relations  with  the  institu- 
tions of  the  Fatherland  were  too  close  to  put  him  above 
suspicion. 

In  establishing  their  foreign  branches,  as  in  other 
forms  of  operations,  the  six  great  German  banks  some- 
times acted  as  individuals  and  sometimes  as  a  body. 
Mention  has  been  made  of  the  subsidiaries  started  by  the 
Deutsche  Bank  alone,  and  similar  foundations  might  be 
cited  for  the  other  banks.  As  a  combination,  the  big 
banks  founded  the  German  Asiatic  Bank,  with  branches 
in  Peking,  Tien-tsin,  Han-kow,  Tsing-tau,  Hong-kong, 
Shanghai,   Yokohama,   Kobe,   Singapore,   Calcutta   and 


170         AMERICA  IN  WORLD  MARKETS 

other  cities  in  the  East,  and  through  this  bank  they  con- 
ducted important  mining  and  railway  enterprises.  In  Hke 
manner  unitedly  they  founded  the  German  East-African 
Bank  and  the  German  West-African  Bank  and  connected 
with  them,  and  with  other  banks,  many  telegraph,  cable, 
radio,  railway  and  mining  and  industrial  and  commer- 
cial undertakings  in  distant  lands. 

In  1894  the  six  banks  combined  to  found  in  Milan  the 
Banca  Commerciale  Italiana — nothing  German  about  the 
name,  be  it  noted.  In  an  astonishingly  short  period  of 
time  it  became  the  dominant  commercial  bank  in  Italy. 
Its  branches  spread  throughout  the  country;  thirty-five 
of  them  were  started  within  a  dozen  years.  Trade  and 
commerce  in  the  entire  Peninsula  became  subservient  to 
them  and  they  followed  Italian  business  wherever  it  went, 
founding  branches  in  Tunis,  in  Turkey  and  in  Brazil. 
These  German  bankers  were  monopolists;  no  outsider,  if 
they  could  help  it,  was  to  have  any  participation  in  Italy's 
development,  and  the  tyranny  which  they  exercised  over 
the  Italian  merchants  and  manufacturers  is  probably 
without  precedent  or  parallel  in  modern  history.  Each 
of  the  six  great  banks  had  its  own  files  of  records 
of  merchants  and  manufacturers  in  every  country  in  the 
world  and  all  of  them  had  the  Schimmelpfing's  mercan- 
tile agency  to  draw  upon  to  supplement  the  records.  With 
this  fund  of  information,  amplified  by  its  own  researches 
on  the  ground,  the  Banca  Commerciale  Italiana  was  soon 
in  possession  of  every  conceivable  detail  concerning  every 
Italian  doing  business  in  any  important  way  in  any  part 
of  Italy. 

If  a  merchant  carried  out  a  banking  transaction  out- 
side of  the  German  bank  the  fact  was  quickly  known 
through  the  agents  which  the  Germans  bad  £verywhere;, 


GERMAN  BANKS  ABROAD  171 

and  the  merchant  was  summoned  and  put  on  the  grill. 
If  he  was  repentant  and  saw  the  error  of  his  ways,  he 
was  mulcted  or  otherwise  made  to  suffer  a  loss  corre- 
sponding to  what  the  German  bank  had  failed  to  make 
on  the  transaction,  and  he  was  re-admitted  to  grace.  If 
he  was  obdurate  in  his  obstinacy,  the  Germans  brought 
their  final  weapon  to  bear.  They  sent  out  private  notice 
to  credit  and  financial  institutions  and  to  the  business 
concerns  with  which  the  man  had  dealings,  that  he  was 
now  in  bad  financial  shape  and  they  advised  that  no  busi- 
ness be  transacted  with  him,  and  presently  the  culprit 
found  himself  boycotted  financially  and  commercially. 
The  fact  is  vouched  for  in  documents  published  with  offi- 
cial sanction  in  Italy. 

Endless  incidents  could  be  cited  of  blackmailing  meth- 
ods applied  to  other  Italian  business  men  to  keep  them 
in  subjection  to  the  German  banking  and  commercial 
system.  Thus,  a  merchant  in  the  north  of  Italy,  who  had 
transgressed  by  ordering  some  machinery  from  an  Amer- 
ican firm  instead  of  from  the  agent  of  a  competing 
German  company,  was  sharply  brought  to  time  by  the 
local  German  bank  with  which  he  dealt.  He  was  in- 
formed that  if  he  insisted  on  going  through  with  the  deal 
the  local  newspapers  would  be  put  in  possession  of  the 
details  of  an  escapade  in  which  his  daughter  had  been 
involved,  and  his  wife  would  be  informed  of  some  of  his 
own  private  delinquencies.  A  merchant  or  manufacturer 
who  did  not  place  his  advertising  through  the  German 
advertising  agency  in  Italy — later  proved  to  be  primarily 
an  agency  of  espionage — saw  his  banking  accommoda- 
tion cut  off  and  his  credit  impaired.  With  extraordinary 
rapacity  the  German  banks  went  about  their  work  of 


in         AMERICA  IN  WORLD  MARKETS 

Germanising  the  financial  and  commercial  markets  of 
Italy. 

A  particularly  interesting  point  is  that  while  the  Ger- 
man banks  started  the  Banca  Commerciale  Italiana  with 
a  capitalisation  of  nearly  $30,000,000,  they  gradually  di- 
minished the  German  stock  holdings  in  it  until  their  stock 
interest  when  this  war  began  was  less  than  five  per  cent 
of  the  total.  Among  the  directors  th^  placed  Italians, 
Frenchmen  and  Englishmen,  but  despite  their  own  small 
holdings  the  Germans  maintained  absolute  rule  over 
the  bank. 

This  has  been  a  typical  German  mode  of  procedure. 
A  large  capital  is  "subscribed"  by  the  powerful  German 
banks  to  found  the  subsidiary  abroad.  Only  a  fraction 
of  it  is  put  up  in  the  fortti  of  cash.  The  stock  is  turned 
over  for  cash,  preferabl)"  of  the  country  in  which  the 
bank  is  to  operate,  care  being  taken  that  the  shares  re- 
main in  the  hands  of  persons  who  are  complacent,  so 
that  there  will  be  no  danger  of  interference  with  the 
all-German  management.  F^uppets  are  put  in  as  direc- 
tors, to  save  appearances,  atld  thus  the  bank,  seemingly 
international  in  character,  arid  really  capitalised  with 
foreign  money,  is  run  by  Germans  and  solely  in  the  in- 
terests of  Germany.  The  fund  of  real  German  money 
that  had  been  used  to  make  the  start  is  taken  to  another 
country  to  repeat  the  operation  of  drawing  out  native 
funds  to  enable  the  German  banks  to  get  their  grip  on 
the  industry  and  commerce  of  the  country  and  make  it 
an  appanage  of  Germany. 

The  Banca  Commerciale  Italiana,  it  should  be  added, 
is  now  a  purely  Italian  institution  and  is  rendering  val- 
uable service  in  developing  Italian  industry  and  com- 
merce. 


GERMAN  BANKS  ABROAD  173 

The  Deutsche  Ueberseeische  Bank  which  the  Deutsche 
Bank  founded  in  1893  was  designed  chiefly  for  business 
in  South  America,  although  a  branch  was  also  estab- 
lished in  New  York.  Twenty-three  branches  of  this 
bank,  known  in  Spanish  as  the  Banco  Aleman  Transat- 
lantico  have  been  in  operation  in  Argentina,  Brazil,  Uru- 
guay, Chile,  Peru,  Bolivia.  In  Spain,  von  Gwinner,  men- 
tioned previously  as  one  of  the  chief  administration 
directors  of  the  German  "great  banks,"  and  known  to 
American  bankers  from  his  association  with  speculation 
by  German  banks  in  American  railroad  securities,  under- 
took the  establishment  of  the  German  branch  banks  in 
Spain.  He  arranged  first  for  the  silent  partnership  of  the 
Deutsche  Bank  with  German  private  banks  in  that  coun- 
try, but  then  cast  discretion  aside  and  organised  the  Span- 
ish-German Bank  and  later  went  a  step  further  and  used 
the  name  Banco  Aleman  Transatlantico,  without  bother- 
ing about  the  incongruity  of  the  name  Transatlantic  ap- 
pliea  to  a  bank  on  the  continent  of  Europe. 

And  now,  using  the  funds  and  resources  of  Spain,  the 
Germans  have  been  reaping  for  the  Fatherland  an  im- 
portant part  of  the  profits  of  the  enterprise  and  labour 
of  the  people  of  that  country. 

In  Belgium  the  silent  partnership  plan  was  worked 
by  the  Deutsche  Bank  in  Brussels  and  by  the  Darmstadter 
Bank  in  Antwerp.  The  Disconto  was  chief  owner  in  the 
International  Bank  in  Brussels  and  in  the  Belgian  Com- 
mercial Company  in  Antwerp.  The  Deutsche  and  the 
Dresdner  controlled  "private"  banks  in  Paris  and  all  the 
six  German  banks  had  their  special  representatives  in  that 
city.  The  Darmstadter  worked  Holland  and  likewise 
Austria  and  Hungary.  The  Dresdner  and  the  Schaaff- 
hausen'scher  took  the  principal  part  in  the  formation 


174  AMERICA  IN  WORLD  MARKETS 

of  the  German  Orient  Bank,  with  branches  in  a  dozen 
cities  in  Turkey,  in  Persia  and  in  Morocco.  The  Dis- 
conto  directed  the  banking  invasion  of  Roumania  and 
of  Bulgaria.    It  also  founded  a  string  of  banks  in  Brazil. 

To  attempt  to  enumerate  the  important  banks  organ- 
ised by  the  Germans  in  foreign  countries  would  be  to 
string  out  tiresome  lists  of  institutions  and  of  places. 
Enough  has  probably  been  set  forth  to  indicate  that  the 
German  financial  web,  spun  around  the  world  with  mar- 
vellous adroitness  and  infinite  industry,  was  as  complete 
as  the  progress  of  our  times  would  permit  or  could  de- 
mand. 

To  distract  the  attention  of  the  nations  while  this  work 
was  being  done  the  Germans  sedulously  insisted  on  two 
points.  One  was  that  England  and  France, had  far  more 
banks  in  foreign  countries  and  that  Germany  was  merely 
acting  for  elementary  protection  in  creating  new  banks 
rapidly.  The  assertion  might  delude  the  unthinking — 
and  many  were  the  unthinking  when  Germany,  before 
the  war,  was  building  up  her  great  financial  and  com- 
mercial machine — ^but,  of  course,  it  does  not  stand  up  un- 
der examination.  The  Banca  Commerciale  Italiana  had 
counted  only  as  one  bank,  but  it  was  greater  than  com- 
bined scores  of  petty  Italian,  French  and  British  banks 
in  Italy,  chiefly  small  exchange  and  foreign  draft  in- 
stitutions. Similarly  the  Banco  Aleman  Transatlantico 
in  Spain  is  a  great  credit  institution  directing  a  com- 
merce representing  a  considerable  fraction  of  that  of 
the  whole  Spanish  nation,  and  cannot  be  spoken  of  in 
any  logical  comparison  with  the  multitude  of  little 
French  bureaus  in  Spain  that  go  by  the  name  of  banks. 
And  similarly  for  the  other  countries. 

The  other  point  on  which  the  Germans  have  insisted, 


GERMAN  BANKS  ABROAD  175 

is  that  the  balance  of  trade  had  for  years  been  unfa^ 
vorable  to  Germany.  Her  imports  in  the  years  imme- 
diately preceding  the  war  exceeded  her  exports  by  some 
hundreds  of  millions  of  dollars.  Some  of  the  German 
economists  invited  the  sympathy  of  the  other  nations 
for  Germany  on  this  showing,  but  others  of  them,  know- 
ing that  every  onlooker  could  see  for  himself  that  Ger- 
many, far  from  being  hurt  by  the  seemingly  adverse  bal- 
ance of  trade,  was  prospering  visibly  and  amazingly,  of- 
fered some  turbid  explanations  that  shed  no  light  on  the 
subject,  at  least  for  the  outsider.  The  fact  is,  of  course^ 
that  the  balance-of-trade  figures  furnish  no  basis  for 
reaching  accurate  conclusions  in  this  case.  We  know 
to-day  that  tremendous  quantities  of  raw  materials  and 
wares  charged  up  against  Germany  in  the  importation 
statistics,  were  owned  by  Germany  at  their  source  in  the 
foreign  country.  We  know  from  revelations  by  the 
Alien  Property  Custodian  and  from  other  sources  that 
great  quantities  of  cotton,  copper,  leather  and  other  ma- 
terials sent  from  the  United  States  to  Germany  were 
owned  by  Germany  here,  although  they  may  have  been 
paid  for  with  good  American  money. 

The  Germans  themselves  cannot  help  gloating  over  the 
true  facts  in  the  case.  "The  foreign  countries  that  send 
us  imports  in  excess  of  our  exports  are  working  for  us. 
Let  them  go  on  working  for  us."  Thus  Riesser,  the 
German  banking  authority,  quotes  some  of  the  Grerman 
economists  as  saying.  And  this  sentiment  may  be  re- 
garded as  comprehensive  of  the  whole  German  theory 
of  foreign  commerce.  "Let  the  foreigner  work  for  us, 
and  let  him  pay  himself  with  his  own  money  for  his 
work."  With  tireless  energy  the  German  banks  have 
exploited  this  theory. 


CHAPTER  X 

THE  SPY  SYSTEM  IN  TRADE 

Secret  Service  Methods  Systematically  Employed — Ex- 
perience of  an  American  Agent  in  Germany — The  Ger- 
man in  France  Possessed  of  Private  Trade  Details — - 
Investigation  of  the  German  Practices — The  Military 
Commercial  Traveller — Demand  That  German  Ways 
Be  Mended. 

It  is  not  in  our  day  that  Germans  departed  from  hon- 
esty in  trade.  With  them  unfair  practices  were  among 
the  traditions.  Hundreds  of  years  ago  German  com- 
merce was  already  tainted.  The  Hanseatic  League  had 
thrived  on  crime.  Lubeck,  Hamburg,  Bremen  and  the 
other  Hansa  cities  became  rich  by  treacherous  and  vio- 
lent suppression  of  independent  traders.  Spies  were  sys- 
tematically employed  at  home  and  abroad  to  steal  trade 
secrets,  to  work  the  ruin  of  competitors  and  to  create 
strife  in  competing  countries  by  financing  and  encour- 
aging contention  between  factions  and  parties.  Monopo- 
lies and  special  tarijflfs  were  also  employed  as  weapons. 
The  League  organised  a  great  trade  combine  of  unparal- 
leled extent.  Its  ramifications  stretched  from  London 
to  Novgorod.  The  trade  morals  of  the  whole  civilised 
world  of  the  time  were  depraved  by  the  Hanseatic 
League. 

Most  of  the  great  German-owned  industrial  establish- 
ments in  the  United  States  were  "spy  centres,"  Mr.  A. 

176 


THE  SPY  SYSTEM  IN  TRADE  177 

Mitchell  Palmer,  formerly  Alien  Property  Custodian, 
stated,  "filled  with  agents  of  Germany  long  plotting 
against  the  safety  of  the  United  States."  He  added 
that  they  were  "part  of  the  great  German  plan  for  the 
military  and  commercial  domination  of  the  world." 

The  systematic  way  in  which  Germany  used  her  Se- 
cret Service  Department  for  trade  purposes,  or  "eco- 
nomic penetration,"  long  ago  aroused  the  serious  con- 
cern of  the  Allies.  Investigations  of  the  methods  em- 
ployed and  of  the  extent  to  which  the  system  proved 
profitable  to  Germany  have  been  made  in  several  coun- 
tries, but  only  a  small  part  of  the  information  discovered 
has  been  made  known  officially. 

In  the  years  immediately  preceding  the  war  large 
American  corporations,  like  similar  firms  in  Europe, 
came  in  frequent  contact  with  the  so-called  "spy  sys- 
tem in  business." 

A  representative  of  an  American  corporation  with 
widespread  foreign  trade  had  occasion  to  travel  much  in 
Europe  and  had  established  headquarters  in  Germany  in 
the  year  before  the  European  war.  He  had  been  warned 
by  friends  to  keep  a  close  eye  on  his  papers  and  effects 
and,  as  far  as  possible,  to  travel  only  with  such  baggage 
as  could  be  taken  in  passenger  compartments  on  the 
trains.  This,  however,  was  not  always  feasible  and  one 
morning  when  leaving  Milan  for  Germany  with  a  trunk 
he  was  struck  by  the  eager  insistence  of  a  German-speak- 
ing employe  of  the  foreign-owned  hotel,  in  which  for 
special  reasons  he  had  stopped,  in  attending  to  the  check- 
ing of  the  trunk  on  the  train.  The  American  watched 
this  employe's  actions  while  the  trunk  was  being  la- 
belled and  felt  reassured  until  he  reached  Basel  in  Ger- 
many, where  the  train  which  had  come  through  Switzer- 


178         AMERICA  IN  WORLD  MARKETS 

land  was  to  be  divided  in  two  sections  and  routed  north 
toward  Berlin,  a  section  on  each  side  of  the  Rhine.  The 
customs  inspection  is  made  for  Germany  at  German 
Basel,  but  the  trunk  in  this  instance  was  not  taken  off 
the  train  and  although  it  was  plainly  visible  in  the  open 
l^^gg^ge  car,  the  chief  inspector  refused  to  listen  to  re- 
monstrances, on  the  alleged  ground  that  the  trunk  was 
routed  via  the  eastern  bank  of  the  river  while  the  Amer- 
ican's ticket  was  for  the  Strassburg  way.  This,  how- 
ever, was  not  in  accordance  with  the  facts.  To  add  in- 
sult to  injury,  as  it  later  proved,  the  inspector  passed 
the  complainant  on  to  a  young  man  who  said  the  way 
to  settle  the  matter  was  to  send  a  telegram.  He  col- 
lected eighty  pfennigs  (about  twenty  cents)  for  a  tele- 
gram, dictating  the  wording  of  it  and  declaring  that  he 
would  afterward  fill  in  the  name  himself  of  the  person 
to  whom  it  should  be  addressed.  He  would  give  no  re- 
ceipt for  the  money,  and  where  the  eighty  pfennigs  ul- 
timately found  its  way  must  remain  a  matter  for  con- 
jecture.   The  telegram  of  course  did  no  good. 

A  week  later  notice  was  received  that  the  trunk  was  at 
the  customs  department  of  a  central  German  city.  An 
appointment  was  made  for  its  inspection  and,  instead  of 
customs  officials,  two  special  agents  were  present  at  the 
appointed  time.  The  inspection  was  thorough.  Every 
document  and  every  scrap  of  paper  was  minutely  exam- 
ined. Endless  questions  were  asked  regarding  the  Amer- 
ican business  documents  and  the  method  of  doing  busi- 
ness which  they  implied,  the  countries  in  which  business 
was  done  and  the  names  of  the  firms  concerned,  the  pre- 
text for  the  questions  being  the  doubt  that  the  printed 
part  of  the  business  documents  might  be  dutiable  as  be- 
ing printed,  and  the  manuscript  and  typewritten  part  of 


THE  SPY  SYSTEM  IN  TRADE  179 

them  might  constitute  contracts  and  therefore  be  subject 
to  duties  under  other  heads.  The  contents  of  the  trunk 
were  weighed  and  separately  classified  and  finally  fees 
were  levied  under  three  separate  heads  for  the  molesta- 
tion caused  by  having  put  the  German  authorities  to  the 
necessity  of  making  this  special  inspection.  A  total  of 
about  three  dollars  was  involved. 

Soon  after  this  incident  the  American  became  con- 
scious that  his  desk  in  an  office  in  that  same  city  was 
being  tampered  with  and,  after  a  watch  had  been  set,  a 
German  in  the  service  of  the  same  American  corpora- 
tion, and  already  suspected  as  being  a  Government  agent, 
was  caught  red-handed  in  the  act  of  prying  open  the  desk 
and  making  a  record  of  its  contents. 

When  confidences  were  exchanged  with  other  repre- 
sentatives of  American  corporations,  it  was  learned  that 
the  experience  was  a  common  one,  and  the  comparing  of 
notes  seemed  to  show  an  explanation  for  the  surprising 
ability  of  German  firms  to  learn  the  names  of  the  foreign 
customers  of  American  corporations  and  the  seeming 
coincidence  of  their  soliciting  those  firms  almost  simul- 
taneously with  the  American  agents,  every  time  that  the 
latter  had  something  new  to  offer.  Incidents  can  be 
vouched  for  where  agents  for  American  corporations  in 
Italy  and  other  countries  on  receiving  from  America  new 
machines  or  radically  new  models  found  to  their  amaze- 
ment that  German  agents  had  already  visited  their  cus- 
tomers, had  described  the  new  machines  or  models  and 
had  denounced  their  alleged  weak  points  and  their  un- 
desirability  for  various  reasons.  The  German  agents  ac- 
tually knew  more  about  the  new  American  offerings  in 
machines  than  the  American  agents. 

In  France,  a  year  before  the  war,  an  American  agent 


180  AMERICA  IN  WORLD  MARKETS 

had  occasion  to  seek  bids  on  the  printing  and  binding  of 
illustrated  machine  catalogues.  Unsolicited,  a  German 
appeared,  in  possession  of  all  the  details  regarding  the 
projected  work,  and  presented  prices  on  behalf  of  a  large 
printing  and  publishing  company  of  northern  Germany. 
His  samples  of  work,  while  inferior  artistically  to  the 
French  offerings,  were  excellent  from  many  points  of 
view  and  his  figures  on  the  job  were  less  than  half  those 
submitted  by  two  of  the  French  bidders,  and  much 
cheaper  than  the  cheapest  French  bid  for  an  inferior 
grade  of  work.  In  the  matter  of  binding  the  German 
was  far  ahead.  Furthermore  he  was  full  of  information 
regarding  the  French  firms  who  could  handle  work  of 
this  kind  and  cited  many  details  derogatory  to  them. 

Apparently  secure  up  to  this  point  that  he  could  carry 
of¥  the  order,  the  German  spontaneously  raised  the  ques- 
tion regarding  the  obligation  imposed  by  the  French  law 
of  having  the  name  of  the  printer  and  the  country  of 
origin  appear  on  the  printed  matter.  He  took  it  for 
granted  that  no  company  doing  business  with  French 
manufacturers  would  wish  to  have  a  German  inscription 
of  origin  appear  on  their  French  catalogues  and  he  was 
ready  with  several  solutions  of  the  problem  involved; 
also  seemingly  taking  it  for  granted  that  an  American 
firm  would  be  willing  to  violate  or  circumvent  the  rigid 
prescriptions  of  the  French  law. 

Three  plans  to  beat  the  French  law  were  proposed. 
First,  the  German  company  would  undertake  to  deliver 
the  catalogues  in  France  without  any  indication  being 
printed  on  them  regarding  their  foreign  origin.  How 
they  were  to  pass  the  French  customs  officials  at  the  bor- 
der was  not  explained;  all  questions  as  to  whether  they 
would  be  smuggled  in  or  passed  by  the  bribing  of  French 


THE  SPY  SYSTEM  IN  TRADE  181 

officials  being  met  with  the  answer  "That's  our  business." 
Second,  the  German  company  would  ship  the  catalogue 
material,  both  letterpress  and  binding,  in  small  irregu- 
lar quantities  through  several  border  points,  marked  as 
samples.  Third,  the  German  company  would  print  its 
name  and  address  on  a  perforated  sheet  and,  after  the 
books  had  entered  France,  this  sheet  could  be  torn  out 
by  the  American  company's  agents  who  delivered  the 
catalogues  personally  to  the  French  customers.  The  cata- 
logues retained  in  the  offices  of  the  American  company 
in  France  would  still  have  the  German  inscription  on 
them  in  fulfilment  of  the  French  law  and  if  any  un- 
marked catalogues  were  discovered  by  French  agents,  it 
would  be  easy  to  explain  that  it  must  have  been  the 
French  customers  who  had  destroyed  the  German  mark- 
ings. When  upbraided  on  the  matter,  the  German,  who 
had  shown  alarm  when  requested  to  put  his  proposals  in 
writing,  promptly  declared  that  in  reality  he  was  not  the 
agent  of  the  German  firm  but  only  a  friend  of  the  agent, 
that  the  suggestions  he  had  made  were  presented  merely 
on  his  own  initiative  and  that  the  German  company  could 
not  be  held  responsible  for  them,  and  he  beat  a  hasty  re- 
treat. Whatever  was  his  position,  he  was  surprisingly 
well  informed.  Many  such  instances  of  German  "pene- 
tration" could  be  cited. 

A  French  writer,  M.  Lucien  Descaves,  who  has  made 
special  investigations  in  this  matter,  quotes  from  a  secret 
document,  of  which  he  has  seen  a  copy,  containing  in- 
structions to  German  engineers,  who  are  called  on  to  sink 
their  professional  pride  and  to  devote  themselves  to  find- 
ing trade  secrets  and  furthering  Germarf  trade,  which 
will  be  readily  possible  for  them  through  the  prestige  of 
their  professional  status. 


18«         AMERICA  IN  WORLD  MARKETS 

An  Italian  publicist  has  stated  that  "the  Italian  author- 
ities have  proofs  regarding  the  manner  in  which  the  Ger- 
man Government  works  hand  in  hand  with  the  German 
system  of  corporations,  organised  almost  like  the  me- 
diaeval guilds,  regarding  the  way  in  which  the  plans  of 
campaign  are  worked  out,  and  the  way  also  in  which 
German  diplomacy  in  all  its  ramifications  is  put  at  the 
service  of  the  trade  campaign."  The  famous  Italian 
financier  and  former  Premier,  Senator  Luigi  Luzzatti, 
urges  the  Allies  to  unite  "not  for  any  Utopian  scheme 
of  trade  protection,  but  in  common  defence  against  the 
secret  intrigues  of  the  German  Government  and  its  secret 
agents  to  the  detriment  of  the  trade  of  the  Allies." 

M.  Emile  Boutroux,  of  the  French  Academy,  has  said : 
"It  is  not  the  amount  of  visible  force  which  will  remain 
to  Germany  after  the  war  which  will  represent  the  mea- 
sure of  the  danger  which  she  will  mean  for  humanity; 
it  is  the  persistence  of  her  determination  to  dominate, 
to  grow  great,  to  oppress  others.  Latent,  hidden,  in- 
visible, its  very  existence  denied,  that  determination,  if 
we  judge  the  future  by  the  past,  will  continue  to  exist. 
The  German  notion  of  sincerity  and  frankness  consists 
in  employing  deliberately  the  means  best  adapted  to  de- 
ceive others  for  the  profit  of  Germany." 

M.  Descaves  has  described  the  results  of  a  tour  he 
made  of  neutral  countries  for  the  purpose  of  investigat- 
ing German  Secret  Service  in  trade.  Both  men  and 
women,  he  says,  are  employed  in  this  way  by  Germany, 
mostly  young  men  and  women.  Secret  Service  and  busi- 
ness promotion  are  practically  convertible  terms.  The 
German  Secret  Service  man  or  woman  is  taught  the  art 
of  trade  development  and  the  German  commercial  trav- 
eller is  taught  the  art  of  espionage.     Germany  realises 


THE  SPY  SYSTEM  IN  TRADE  183 

that  the  role  of  commercial  traveller  is  the  best  disguise 
for  a  Secret  Service  agent  and  that  Secret  Service  is 
the  best  of  all  adjuncts  to  trade.  Germany,  according 
to  M.  Descaves,  is  inundating  the  neutral  countries  with 
literature  and  w^ith  agents.  The  agents  are  recognised 
as  by  far  the  more  productive.  Printed  documents  are 
scattered  broadcast,  but  unless  they  are  followed  by  many 
others,  they  are  soon  forgotten.  Where  the  agents 
follow  one  another,  working  with  mutual  aid,  their  work 
is  practical  and  profitable.  They  perform  not  merely  a 
common  task ;  they  work  out  a  propaganda. 

During  the  war,  this  writer  stated,  the  Germans  sys- 
tematically granted  furloughs  from  the  army  to  their 
mobilised  men  who  had  been  commercial  travellers  in  for- 
eign countries.  These  men  were  authorised  to  visit  their 
former  customers  and  were  urged  to  work  with  zeal  and 
adroitness  and  to  produce  practical  results.  Special  re- 
wards were  reserved  for  those  able  to  practice  espionage 
for  the  benefit  of  Germany.  The  agent  had  a  double, 
or  rather  a  triple,  part  to  play.  He  was  openly  placing 
his  country's  products,  he  was  advertising  his  country's 
greatness  and  secretly  he  was  gaining  information  re- 
garding Germany's  neighbors  and  her  enemies.  These 
German  commercial  agents  for  the  most  part  were  young, 
industrious,  insinuating,  tenacious.  The  promises  they 
made  in  the  name  of  the  great  commercial  firms  of  Ger- 
many were  kept.  They  were  serviceable  and  they  pushed 
their  eagerness  to  be  agreeable  to  the  point  of  servility. 
While  they  did  not  succeed  in  making  themselves  popular 
they  imposed  themselves  on  the  business  men  because 
they  could  quickly  obtain  from  Germany  what  merchants 
had  patiently  but  vainly  sought  elsewhere. 


CHAPTER  XI 


INFLUENCING  THE  PRESS 


Court  Martial  Exposes  German  Ways  of  Press  Corrup- 
tion— German  Female  Spy  Marries  Pre-Selected  Ital- 
ian Sailor — She  Handled  Newspapers — Publicity  Or- 
ganisation of  German  Corporations — Denounced  as 
"Corruption  Agency" — Socialist  Internationale  Used 
as  Intermediary. 

The  foreign  press  was  the  object  of  intensive  efforts 
on  the  part  of  the  Germans.  To  facilitate  espionage,  to 
spread  "defeatist"  and  bolshevist  doctrines,  to  discour- 
age foreign  business  seeking  trade  outlets,  to  arouse  sus- 
picion and  enmity  among  the  great  nations,  a  systematic 
campaign  of  corruption  was  put  in  motion  by  Germany's 
leaders.  Direct  subsidies  and  indirect  subventions  in  the 
guise  of  payment  for  advertising  were  among  the  means 
employed.  So  difBcult  was  it  to  cope  with  this  evil  that 
both  France  and  Italy  were  obliged,  in  the  fourth  year 
of  the  war,  to  decree  that  no  newspapers  or  other  pub- 
lications carrying  advertising  of  any  kind  should  be  sent 
abroad  from  those  countries.  The  French  and  Italian 
newspapers  and  periodicals  went  to  foreign  countries 
with  all  their  advertising  space  blank. 

The  trial  in  Genoa,  in  the  Spring  of  191 8,  of  the  heads 
of  the  Officine  Elettriche  Genovesi  revealed  the  amazing 
boldness  of  the  Berlin  spy  system  in  its  operations  in  a 
country  at  war  with  Germany  and  the  endless  entangle- 

184 


INFLUENCING  THE  PRESS  185 

ments  which  were  erected  around  the  organisation  to  ren- 
der it  immune  from  legal  attack.  It  also  testified  to  the 
long-suffering  tolerance  of  the  Italian  Government.  The 
O.  E.  G.,  as  the  concern  was  popularly  known,  a  sub- 
sidiary of  the  German  General  Electric  Company  of  Ber- 
lin, had  obtained  control  of  the  public  services  and  even 
the  harbor  transportation  of  the  port  of  Genoa.  Herr 
Koenigsheim,  the  supreme  director  of  the  company,  was 
called  the  "German  Governor  of  Genoa."  The  phrase 
was  used  at  the  trial  by  the  Italian  commander  of  the 
Arsenal  and  Artillery  Factory  of  Genoa,  who  gave  evi- 
dence regarding  the  espionage  system  conducted  by  Koe- 
nigsheim, to  whom  all  the  German  spies  in  northern  Italy 
reported  as  to  their  supreme  chief.  Koenigsheim  fled 
from  Italy  when  his  machinations  became  known  and 
was  sent  by  his  government  to  Bucharest  as  head  of  the 
German  spy  system  in  Roumania. 

Among  the  charges  made  at  the  trial  against  this  man 
and  his  subordinates  were  sabotage  of  Italian  war  plants 
— destruction  of  property  in  the  Government  artillery 
and  munitions  factories,  in  the  naval  radio  stations,  on 
shipboard  and  elsewhere — communication  with  the  enemy 
to  the  detriment  of  Italy,  and  high  treason.  It  was  as 
an  incident  that  espionage  and  intention  to  misuse  the 
press  were  brought  into  the  trial. 

One  of  Koenigsheim's  agents  was  a  young  woman  who 
had  been  sent  from  Berlin  with  the  recommendation  from 
the  chief  of  the  espionage  bureau  that  she  was  "a  very 
capable  and  penetrating  agent."  She  had  been  in  Italy 
only  a  few  weeks  when  she  married  a  petty  officer  in  the 
Italian  navy.  An  officer  of  the  Italian  Carabinieri,  or 
gendarmes,  testified  that  he  had  proof  that  it  was  Koe- 
nigsheim who  arranged  the  marriage  and  who  picked  out 


186         AMERICA  IN  WORLD  MARKETS 

the  young  man,  whose  work  gave  him  access  to  impor- 
tant military  positions. 

This  young  woman  communicated  directly  with  the 
espionage  chief  in  Berlin.  Her  correspondence  showed 
that  she  pulled  the  strings  all  over  Italy  where  German 
spies  were  working  and  it  required  great  patience  and 
ingenuity  on  the  part  of  the  Italian  Secret  Service  to 
follow  the  lines  that  led  from  her  office  and  to  circumvent 
her  activities.  Her  work  had  been  so  pernicious  that  the 
public  prosecutor  demanded  a  penalty  of  twenty  years  in 
jail  in  her  case.  It  was  she  who  handled  the  newspaper 
lists.  Minute  details  were  forwarded  by  her  to  Berlin 
regarding  Italian  newspapers,  copies  of  which  she  also 
forwarded,  and  to  her  were  delivered  copies  of  French, 
English  and  Spanish  newspapers,  which  she  likewise 
transmitted  to  her  chief.  The  precise  nature  of  her 
dealings  in  this  regard  was  not  made  public,  but  it  was 
significant  that  immediately  after  the  matter  was  to  some 
extent  vented  before  the  court  martial  the  decree  was 
published  suppressing  all  advertising  in  newspapers  going 
abroad  and  forbidding  any  one  but  a  specially  appointed 
postal  agent  from  mailing  newspapers  destined  for  for- 
eign countries. 

Zurich,  Switzerland,  was  the  way-station  for  the  com- 
munications between  Genoa  and  Berlin,  and  it  was  due 
to  the  fact  that  the  stock  control  of  the  Genoese  com- 
pany was  held  in  the  so-called  "Elektro  Bank"  of  Zurich' 
that  the  Italian  Government  had  hesitated  so  long  about 
laying  hands  on  the  concern  in  Genoa.  It  was  necessary 
to  establish  beyond  question  that  the  bank  was  owned 
by  the  General  Electric  Company  of  Germany  and  by 
the  Deutsche  Bank  before  action  could  prudently  be 
taken. 


INFLUENCING  THE  PRESS  187 

One  of  the  German  organisations  created  during  the 
war  for  the  purpose  of  endeavoring  to  influence  the 
press  of  the  world  was  the  "Ala,"  whose  mission  was  to 
manipulate  newspapers  in  Germany  and  in  other  coun- 
tries, through  funds  ostensibly  paid  out  for  advertising. 
Another  was  the  "Archiv,"  which  operated  in  conjunc- 
tion with  the  "Ala,"  and  handled  the  work  of  espionage 
developed  through  the  agency. 

Both  the  "Ala"  and  the  "Archiv"  were  under  the  di- 
rection of  Dr.  Hugenberg,  one  of  the  most  influential 
of  the  Krupp  directors. 

The  name  "Ala"  is  a  contraction  from  Allgemeine 
Anzeigegesellschaft  (General  Advertising  Company) 
which  had  as  its  avowed  purpose  the  placing  of  adver- 
tising in  home  and  foreign  newspapers  and  periodicals 
in  behalf  of  the  great  German  industries.  The  "Archiv" 
existed  ostensibly  for  the  purpose  of  gathering  and  co- 
ordinating information  of  practical  economic  benefit  to 
Germany  in  co-operation  with  the  "Ala." 

All  the  members  of  the  great  union  of  German  manu- 
facturers and  merchants,  effected  for  the  conduct  of  the 
war  and  for  the  preparation  for  the  transition  from  the 
war  footing  to  tlie  peace  footing,  were  represented  on 
the  board  of  the  two  organisations  and  contributed  pro 
rata  to  the  expenses  of  their  operation,  in  payment  nom- 
inally for  the  advertising  of  the  individual  industries. 
Theodore  Wolff  of  the  Berliner  Tagehlatt  denounced 
these  organisations  and  declared  that  the  "Archiv"  was 
in  reality  "a  detective  bureau"  and  the  "Ala"  a  "true  and 
actual  agency  of  corruption  and  subornation." 

In  a  public  trial  in  Italy  the  editor  of  the  most  widely 
circulated  Socialist  newspaper  of  northern  Italy,  an 
avowed  anti-war  and  anti-monarchical  organ,  admitted 


188  AMERICA  IN  WORLD  MARKETS 

that  he  had  received  about  $10,000  from  the  "Interna- 
tionale" organisation  in  Switzerland.  The  Italian  Gov- 
ernment agents  who  were  in  contact  with  that  organi- 
sation had  proof  that  it  was  financed  from  Berlin  and 
that  it  was  sending  funds  to  newspapers  in  other  coun- 
tries besides  Italy. 

For  many  years  before  the  war  a  German  newspaper 
advertising  agency,  which  operated  under  a  partnership 
name,  exerted  a  powerful  influence  in  many  European 
countries  and  its  activities  extended  to  all  parts  of  the 
world.  In  Italy,  for  instance,  it  controlled  by  far  the 
greater  part  of  the  general  press  advertising  of  the  king- 
dom and  only  the  prosperous  newspapers  could  consider 
themselves  immune  from  its  influence.  It  handled  the 
advertising  not  merely  of  the  firms  immediately  under 
German  control,  but  also  of  many  others  which  invol- 
untarily were  brought  under  its  sway.  An  Italian  manu- 
facturer who  employed  this  agency  found  that  the  local 
commercial  bank,  owned  or  managed  by  Germans,  was 
liberal  in  its  treatment  of  him.  The  manufacturer  who 
tried  to  turn  a  deaf  ear  to  this  agency  was  rudely  brought 
to  his  senses  by  the  bank,  if  he  was  under  obligations 
to  the  latter.  The  agency's  power  over  a  considerable 
section  of  the  press  can  readily  be  understood,  but  the 
tyrannical  way  in  which  that  power  was  used  can  only 
be  appreciated  by  those  who  have  intimate  knowledge 
of  German  financial  methods. 

For  some  time  after  the  war  began  this  concern  con- 
tinued openly  its  operations  in  Italy  under  the  fiction  that 
it  was  Swiss,  and  not  German,  but  the  mask  ultimately 
was  torn  from  it  and  its  activities  were  interfered  with, 
at  least  as  far  as  the  then  existing  organisation  was 
concerned.     Very  soon,   however,   certain  new  adver- 


INFLUENCING  THE  PRESS  189 

tising  agencies  came  into  being  in  France,  Italy  and 
other  countries,  but  in  time  it  was  discovered  that  their 
funds  were  being  received  from  Switzerland  and  their 
enemy  alien  character  was  revealed  as  a  result  of  inves- 
tigation in  the  latter  country.  The  Italian  government 
has  ascribed  to  the  German  literary  propaganda  the  great 
Austro-German  victory  at  Caporetto  in  October,  19 17, 
and  the  succeeding  invasion  of  Italy  which  was  well 
nigh  fatal  to  that  country. 


CHAPTER  XII 

TO  PROTECT  AMERICAN   PRODUCTS 

The  Distinctives  of  Merchandise — Germans  'Systemat- 
ically Appropriated  Those  of  Other  Peoples — "Vi- 
enna" Hand  Bags  Made  in  Germany — No  Business 
Too  Trivial  for  Imitation — Incident  of  the  "American 
Saints"  in  Mexico — United  States  Products  Particu- 
larly Exposed  to  Appropriation. 

In  the  yi^orld's  markets  the  retail  purchaser,  seeking 
baggage,  makes  his  choice  between  an  English  bag  and 
a  French  bag,  and  knows  that  the  characteristics  of  each 
are  distinctive.  There  is  a  difference  between  the  Eng- 
lish bag  and  the  French  valise,  as  there  is  between  an 
English  suit  of  clothes  and  a  French  suit;  the  former 
aiming  to  drape  the  male  figure  with  a  certain  elegant 
fulness  and  prodigality  of  material,  and  the  latter  fur- 
nishing neatness  and  exactitude  in  fitting,  and  there  is 
a  no  less  marked  difference  between  an  English  watch 
and  a  French  watch,  between  an  English  picture  and  a 
French  picture,  between  an  English  glove  or  shoe  and 
a  French  glove  or  shoe.  The  difference  is  a  tremen- 
dously valuable  commercial  asset. 

The  foreigner  when  filling  his  needs  is  not  merely 
moved  to  make  his  choice  dependent  on  well-known 
characteristics  in  the  merchandise,  but  he  is  inclined  to 
duplicate  his  requirements.  His  inability  to  decide  on 
a   superiority  of  attraction  between   an   English   clock 

190 


TO  PROTECT  AMERICAN  PRODUCTS     191 

and  a  French  clock  will  often  induce  him  to  purchase 
both.  What  may  be  called  the  distinctives  of  trade  give 
to  the  products  of  England  and  of  France  an  assured 
position  in  all  markets. 

Even  in  Germany  before  the  war  the  most  exclusive 
and  most  expensive  men's  furnishing  stores  in  all  the 
leading  cities  flaunted  the  sign  "The  Jockey  Club" 
or  some  other  English  device,  and  dealt  only  in  English 
wares,  and  the  most  elegant  shoe  stores  sold  women's 
footwear  made  by  Pinet  of  Paris  and  men's  shoes  from 
a  factory  at  Romans  in  the  southeast  of  France.  And 
meantime  German  manufacturers  were  industriously 
spreading  throughout  the  world's  markets  close  imita- 
tions of  English  garments  and  furnishings  for  men  and 
of  French  footwear  for  men  and  women. 

In  some  lines  the  imitations  sent  out  by  Germany 
bore  their  own  condemnation  for  every  experienced  eye, 
in  their  characteristics  which  revealed  them  as  imita- 
tions.    But  this  was  not  the  case  universally. 

Austria  had  won  world  honor  for  products  of  various 
kinds.  Royal  Vienna  porcelain  acquired  prestige  and 
was  in  demand  in  foreign  lands.  The  Germans  imitated 
it  and  flooded  the  world  with  gaudy  plates  which,  instead 
of  being  adorned  with  artistic  hand-paintings,  contained 
paper  pictures  pasted  on  the  plates,  and  to  make  the 
fraud  pass,  had  a  mark  almost  identical  with  the  Royal 
Vienna  symbol  painted  on  the  bottom  of  the  plates. 

Women's  hand  bags  and  pocketbooks  made  in  Austria 
were  also  highly  esteemed  in  all  the  principal  countries. 
Damentaschen  made  in  Vienna  were  in  demand  and  com- 
manded high  prices.  In  this  case  also  German  manu- 
facturers went  into  the  imitation  business,  but  from  the 
early  cheap  imitations  they  progressed  to  the  production 


192  AMERICA  IN  WORLD  MARKETS 

of  a  high-grade  article.  Expert  bag  makers  were  brought 
from  Vienna  and  a  close  duplicate  of  the  Austrian  spe- 
cialty was  turned  out. 

So  far  there  was  nothing  notably  unethical  in  the  pro- 
ceeding. But  the  German  manufacturer  had  no  idea 
merely  of  entering  into  open  competition  with  Austria 
in  Damentaschen.  He  determined  to  put  his  goods  on 
the  world's  markets  fraudulently  as  Vienna  products. 
One  of  the  leading  manufacturers  of  ladies*  bags  of 
Offenbach,  near  Frankfort-on-Main,  the  centre  of  the 
industry  in  Germany,  declared  to  the  present  writer  that 
90  per  cent  of  the  "Vienna"  bags  and  pocketbooks  sold 
in  the  United  States  were  made  in  Germany;  that  they 
were  sent  first  to  Vienna  to  be  stamped  there  with  the 
Vienna  mark  and  that  thus  they  paid  import  duty  twice, 
once  to  Austria  and  again  to  the  United  States.  These 
German  manufacturers  were  simply  engaged  in  the  prac- 
tice of  stealing  an  important  trade  asset  of  Austria. 

The  systematic  imitation  of  the  merchandise  and 
marking  of  merchandise  of  other  nations  is  carried  out 
by  the  Germans  even  in  the  most  unexpected  places  and 
with  a  thoroughness  which  at  times  seems  ludicrous,  but 
which  our  present  knowledge  of  German  plans  shows 
to  be  all  too  serious.  In  Mexico  an  astonishingly  large 
proportion  of  business  is  done  throughout  the  country 
by  Arab  peddlers.  These  "Arabs"  are  for  the  most  part 
Syrians,  adherents  to  Christianity,  but  as  they  wear  the 
sombrero  and  the  garb  of  the  Mexican  they  pass  off  com- 
monly for  natives.  They  replace  the  mail-order  business 
in  Mexico  and  they  sell  on  time  and  on  instalment  when 
they  cannot  get  cash.  With  quite  remarkable  enterprise 
they  are  ready  to  take  an  order  for  a  sewing  machine, 
for  an  agricultural  machine,  a  piano,  or  an  automobile 


TO  PROTECT  AMERICAN  PRODUCTS     193 

from  a  Hacendado  and  to  collect  from  him  in  instalments 
over  a  lengthy  period,  and  at  the  same  time  they  supply 
the  Pelado,  the  poorest  of  the  country's  poor,  with  his 
rudimentary  needs  in  the  way  of  wearing  apparel,  cot- 
ton trousers,  sandals  and  bandana  head  covering.  But 
the  chief  part  of  their  trade  is  in  furnishing  the  peon 
class  with  cheap  finery  and  ornaments.  The  majority 
of  these  Arabs  are  tributary  to  the  City  of  Mexico,  and 
the  street  immediately  to  the  south  of  the  National  Pal- 
ace in  that  city  is  occupied  almost  entirely  by  the  Arab 
wholesale  merchants,  who  supply  the  merchandise,  at- 
tend to  the  filling  of  orders  and  arrange  the  financing  of 
the  travelling  peddlers. 

An  American  who  had  studied  the  market  broached 
this  trade  one  day  with  a  quantity  of  a  new  kind  of  jew- 
elry, the  chief  feature  of  which  was  a  gilt  and  enamel 
brooch,  with  a  celluloid-covered  photograph  supposed  to 
depict  the  figure  of  some  of  the  popular  saints,  but  in 
reality  reproducing  the  features  of  American  actresses. 
The  materials  were  produced  in  bulk  in  Providence  and 
New  York  and  put  together  in  Mexico  and  the  finished 
product  was  sold  very  cheap.  The  peons  fought  for  the 
American  Saints  (Santos  Americanos)  or  Santitos 
(Little  Saints)  as  they  became  commonly  known,  and 
the  dealers  could  not  get  enough  of  them.  The  Ameri- 
can patented  the  brooch  and  prepared  to  enter  the  junk 
jewelry  trade  in  a  considerable  way. 

But,  after  little  more  than  a  month  had  elapsed,  a  Ger- 
man agent  presented  to  the  Arab  merchants  an  imitation 
of  the  Santitos,  a  poor  thing  in  comparison  with  the 
American's,  a  single  piece  brooch  with  the  Saint  printed 
on  the  metal.  He  asked  about  one-half  the  American's 
price  and  offered  four  months'  time,  as  against  spot  cash. 


194.  AMERICA  IN  WORLD  MARKETS 

The  American  Saints  thereafter  sold  in  Mexico  were 
made  in  Germany,  and  the  American  felt  that  it  would 
be  a  waste  of  his  time  and  money  to  fight  for  his  rights. 
The  first  impression  of  one  acquainted  with  the  incident 
was  surprise  that  German  manufacturers  should  bother 
with  such  a  petty  and  precarious  business,  but  later  ex- 
perience showed  that  no  business  was  too  trivial  for  Ger- 
man organised  commerce  to  touch  and  that  like  proce- 
dure has  been  going  on  in  the  Central  and  South  Ameri- 
can republics  and  even  in  more  remote  quarters  of  the 
globe.  To  the  German  scientifically  schooled  for  trade, 
every  chance  that  offers  for  "economic  penetration"  must 
be  grasped  and  it  should  be  remembered  that  the  German 
graduate  of  commerce  is  usually  at  the  same  time  a  grad- 
uated purveyor  of  military  and  other  intelligence  for  the 
Fatherland. 

American  goods  are  particularly  exposed  to  German 
fraudulent  imitation  because  generally  they  lack  the  dis- 
tinctives  of  their  national  origin.  There  are,  of  course, 
American  pianos,  agricultural  machines,  watches,  bridges, 
which  have  these  distinctives  and  accordingly  have  won 
for  themselves  special  recognition  in  foreign  markets; 
but  they  are  the  exception.  American  manufacturers  gen- 
erally, regarding  the  foreign  market  as  only  a  minor  one, 
had  not  aimed  to  nationalise  their  trade,  to  make  known 
its  distinctive  features  so  as  to  prevent  the  Germans 
from  appropriating  them,  or  to  produce  articles  so  pecu- 
liarly American  that  they  would  be  known  as  such  on 
sight,  just  as  English  and  French  wares  have  recognis- 
able qualities  associated  with  the  countries  from  which 
they  originate.  Until  they  set  themselves  to  the  task  of 
turning  out  products  that  meet  the  foreigner's  views  and 
are  yet  distinctively  American,  and  of  handling  their 


TO  PROTECT  AMERICAN  PRODUCTS     195 

trade  in  a  way  that  is  specifically  national,  they  will  not 
have  begun  to  fulfil  this  aim. 

Thus,  for  example,  if  the  Latin-American  likes  his 
shirt  with  voluminous  tails  and  with  the  neckband  cut 
low  in  the  front,  there  is  no  reason  why  a  shirt  con- 
forming with  these  requirements  should  not  merely  be 
made  in  America,  but  be  distinctively  and  conspicuously 
an  American  shirt.  The  distinctive  characteristics  do  not 
necessarily  mean  the  special  form  of  the  article  as  used 
at  home. 

To  create  the  American  distinctives  of  trade  it  will  be 
necessary  for  American  merchants  to  make  a  united 
effort.  It  is  not  too  much  to  say  that  it  may  be  regarded 
by  them  as  a  patriotic  duty  to  further  this  nationalisation 
of  American  trade.  Concerted  work  on  the  part  of  man- 
ufacturers will  be  needed  to  effect  promptly  for  Ameri- 
can goods  what  the  amour  propre  of  the  Frenchman  and 
the  fine  national  spirit  of  the  Englishman  have  done  for 
theirs.  All  who  have  handled  American  machinery  in 
foreign  countries  know  how  difficult  it  is  to  get  around 
the  psychological  spell  cast  by  the  words  "Made  in  Eng- 
land" or  "Made  in  France"  inscribed  on  a  machine.  In 
manufacturing  machinery  America  leads  the  world,  is 
facile  princeps,  but  in  the  years  since  this  superiority 
was  assumed  but  little  has  been  done  to  impress  it  on  the 
foreigner.  Germany  has  had  too  much  to  do  with  hand- 
ling American  manufactures.  Her  ships  have  carried 
them,  her  agents  have  made  money  and  have  promoted 
German  trade  by  selling  them  and  have  had  a  free  hand 
in  making  of  them  a  trade  asset  for  their  own  country. 


CHAPTER  XIII 

BRIBERY  IN  TRADE  PROMOTION 

Mystery  of  American  Trade  Misfortunes  Abroad — Sa- 
botage a  Typically  German  Weapon — Italian  Premier 
Denounces  Bribery — When  Krupps  Were  Exposed — 
An  Apology  for  Commercial  Immorality — How  Shim- 
melpfeng  Credit  Agency  Obtained  Its  Famous  Lists — 
German  Professors  as  Corrupters  in  Italy. 

Leading  American  corporations  in  the  past  spent  large 
sums  in  the  effort  to  fathom  the  mystery  of  their  mis- 
haps and  misfortunes  in  distant  countries.  When  Amer- 
ican merchandise  was  found  damaged  on  the  piers  of 
South  American  ports,  it  was  reported  back  that  the 
shippers  in  this  country  did  not  know  how  to  pack  their 
wares. 

This,  however,  did  not  satisfactorily  explain  why  it 
frequently  happened  that  when  an  agent  from  this  coun- 
try had  succeeded  in  booking  an  order  of  any  importance 
in  South  America,  a  German  agent  was  at  once  aware 
of  the  fact,  was  after  the  South  American  merchant  with 
an  offer  to  deliver  equivalent  goods  at  a  much  lower 
figure  and  at  the  entire  risk  of  the  German  firm  if  the 
South  American  did  not  desire  to  accept  the  goods  when 
presented,  and  that  it  was  the  latter  goods — often  ma- 
chinery or  manufactures  that  had  been  produced  in  the 
United  States,  were  thence  shipped  to  Hamburg  or  Bre- 
men and  reshipped  to  the  South  American  port — which 

ig6 


BRIBERY  IN  TRADE  PROMOTION         197 

were  actually  delivered  to  and  accepted  by  the  South 
American  merchant  while  the  American  goods  to  fill  the 
order  lay  wrecked  in  gaping  packing  cases  on  the  local 
wharves. 

To-day  we  know  that  German  agents  had  systemat- 
ically bribed  customs  officials  and  dock  employes  at  South 
American  ports;  we  know  that  sabotage  was  quite  regu- 
larly committed  on  United  States  merchandise,  and  we 
have  reason  to  suspect  that  German  bribery  penetrated 
deep  into  the  business  establishments  of  South  American 
firms. 

Sabotage,  the  damaging  of  work,  machinery,  or  tools, 
was  generally  regarded  as  a  practice  originating  with 
French  anarchist  workers.  To-day  this  atrociously 
vicious  form  of  destructiveness  is  recognised  as  German 
in  its  origin  and  propagation. 

We  know  now  that  the  thefts  and  damage  inflicted 
on  American  goods  sent  to  Italy,  causing  serious  loss 
to  American  merchants  and  discouraging  them  from 
pushing  actively  into  the  Italian  market,  were  the  conse- 
quence largely  of  German  bribery.  The  now  notorious 
O,  E.  G.  (Ofiicine  Elettriche  Genovesi — Genoese  Electric 
Plants),  a  subsidiary  of  the  German  General  Electricity 
Company,  was  revealed,  at  a  court  martial  last  year  in 
Italy,  to  have  been  in  practical  control  of  the  harbor 
transportation  of  Genoa,  and  its  four  German  directors 
were  convicted  of  consistently  procuring  sabotage  and 
were,  for  this  and  other  crimes,  sentenced,  in  their  ab- 
sence, to  death. 

At  home  we  have  had  incidents  of  clerks  in  business 
•firms  being  bribed  in  the  interests  of  Germany  to  reveal 
the  current  transactions,  copies  of  cablegrams,  and  the 
like ;  of  attempts  to  bribe  customs  officials ;  of  bribery  and 


198         AMERICA  IN  WORLD  MARKETS 

sabotage  at  transportation  points;  of  bribery  of  factory 
hands,  and  so  on.  Enough  is  known  and  has  been  made 
public  regarding  the  German  backing  of  the  I.  W.  W. 
and  of  the  German  plans  to  bribe  organs  of  publicity, 
politicians  and  members  of  the  bench,  to  show  the  extent 
and  the  methodical  organisation  of  German  bribery  in 
this  country.  Whole  industries  have  been  in  some  de- 
gree affected  by  it  and  it  was  extended  even  to  American 
agriculture. 

Proofs  abound  that  the  Imperial  German  Government, 
through  its  accredited  agents  and  through  the  great  man- 
ufacturing and  mercantile  establishments  in  which  the 
Government  was  a  co-partner,  not  merely  authorised,  but 
inculcated  bribery  as  a  means  of  economic  penetration. 

In  June,  191 5,  Antonio  Salandra,  then  Italian  Pre- 
mier, stigmatised  the  wholesale  campaign  of  bribery 
which  the  German  Government  had  for  years  been  con- 
ducting in  Italy.  As  arch-briber  he  named  Prince 
Bernhard  von  Biilow,  who  twenty  years  ago  was  German 
ambassador  to  Italy,  later  was  Imperial  Chancellor  and 
then  was  special  ambassador  to  Italy  in  the  interval  be- 
tween the  beginning  of  the  European  war  and  the  entry 
of  Italy  into  it. 

Prince  von  Biilow,  the  Premier  stated,  had  bribed  poli- 
ticians, merchants,  newspapers.  "Germany,"  he  said, 
"believed  that  money  could  paralyse  Italy  and  put  her 
politically,  commercially  and  morally  at  the  mercy  of 
Germany,  and  German  diplomats  spent  millions  of  marTis 
to  put  Germany  in  control  of  Italy's  national  policies  as 
well  as  of  her  industry  and  commerce." 

Bribes  were  distributed  in  revolutionary  circles  to  un- 
dermine the  Italian  King's  authority  and  the  strikes  at 
Prato  and  the  disastrous  riots  at  Empoli  were  started 


BRIBERY  IN  TRADE  PROMOTION         199 

with  German  money,  as  was  proved  by  the  confession 
of  the  organisers  and  ringleaders.  No  use  in  making  de- 
nials, when  the  Italian  Premier  was  ready  to  answer  the 
denials  by  showing  to  the  world  the  proofs  of  his  as- 
sertions. 

Half  a  dozen  years  ago,  seemingly  as  a  result  of  bit- 
ter disputes  among  politicial  parties  in  Germany,  the 
Krupp  firm  came  into  the  Berlin  courts  for  bribing  Gov- 
ernment officials  to  start  a  war  scare,  so  as  to  get  orders 
from  the  Reichstag  for  more  Krupp  guns.  The  case  was 
hushed  up  as  far  as  possible  and  probably  it  would  never 
have  reached  public  notice,  were  it  not  that  certain  Paris 
newspapers  were  denouncing  Krupp  agents  for  trying 
to  bribe  French  newspapers  for  a  similar  purpose,  with 
the  design,  as  it  seemed  at  the  time,  to  promote  business 
for  the  ordnance  manufacturers.  The  guilt  of  the  Krupp 
agents  was  not  denied,  although  the  association  of  the 
German  Government  with  the  concern  was  known  to  be 
of  the  most  intimate  kind. 

The  Japanese  Government,  a  year  or  so  later,  aired  be- 
fore the  Tribunals  of  Tokio  the  bribery  activities  of  the 
agent  of  the  Siemens-Schuckert  Company  of  Berlin,  a 
concern  whose  subsidiaries  and  affiliated  companies  en- 
circle the  globe.  This  agent  had  bribed  all  kinds  of  func- 
tionaries of  low  degree,  including  janitors  and  office 
cleaners  of  Government  departments,  and,  for  bribery 
and  theft  of  important  documents,  was  sentenced  to  two 
years  in  jail. 

As  there  was  no  way  of  denying  the  existence  of  brib- 
ery as  a  German  policy  of  expansion,  the  German  mili- 
tarists have  scornfully  rejected  the  old  theories  on  com- 
mercial morality  and  have  expounded  a  thesis  on  the  new 
ethics.    Briefly  it  is  this :  Warfare  is  a  justifiable  means 


«00         AMERICA  IN  WORLD  MARKETS 

of  enforcing  the  policy  of  the  State.  Industry  and  com- 
merce are  instruments  of  modem  warfare.  It  is  no  more 
immoral  to  employ  bril>ery  in  commercial  warfare  than 
it  is  to  poison  wells,  to  kill  women  and  children  in  open 
towns,  or  to  sink  non-combatant  ships  without  trace. 
All  these  things,  far  from  being  immoral,  are  highly 
laudable  if  their  purpose  is  to  hasten  Germany  to  her 
goal  of  world  domination. 

The  Italian  economist,  Giovanni  Preziosi,  declares  that 
*the  German  doctrine,  as  taught  in  the  higher  institutions 
of  commercial  science,  is  that  "every  exploitation  of 
others,  every  encroachment  made  in  foreign  countries, 
by  whatsoever  method  it  is  accomplished,  is  a  respect- 
able equivalent  of  military  conquest."  This  is  the  Ger- 
man doctrine  of  the  present  generation.  It  may  be  said, 
while  still  dealing  with  the  apologetics  of  German  brib- 
ery, that  Germany  seems  to  have  started  off  on  her  great 
career  of  industrial  and  commercial  expansion  without 
any  thought  of  adopting  bribery  as  an  essential  part  of 
her  economic  policy.  It  was  when  the  first  great  crash 
from  over-expansion  came  with  bitter  experiences  in 
Japan  and  other  countries  in  bad  times,  that  Germany 
as  a  nation  was  seen  to  resort  to  the  most  ignoble  form 
of  commercial  dishonesty. 

Germany  had  rushed  headlong  into  the  world's  mar- 
kets without  the  safeguards  that  England,  France  and 
other  countries  had  built  up  for  themselves  in  genera- 
tions of  trading.  One  thing  that  was  lacking  to  Germany 
was  a  line  of  credit  information.  It  was  then  that  the 
Schimmelpfeng  Information  Company  came  to  the  fore. 
It  engaged  to  do  in  a  short  time  what  the  other  coun- 
tries had  accomplished  only  in  centuries.  As  there  was 
no  way  of  acquiring  in  a  few  brief  years  the  commercial 


BRIBERY  IN  TRADE  PROMOTION        201 

knowledge  which  is  gathered  as  the  result  of  long  ex- 
perience, the  information  company  undertook  to  rifle  the 
credit  storehouses  of  England,  France,  Holland,  Belgium 
and  other  countries  and  to  gain  one  of  the  most  precious 
of  the  national  assets  of  those  countries — by  bribery. 
And  Schimmelpfeng  became  the  world's  greatest  credit 
bureau.  Germans  boasted  of  it  as  one  of  the  monu- 
ments of  their  commercial  greatness. 

Who  has  not  heard  the  stories  of  the  American  tour- 
ist in  Berlin  putting  Schimmelpfeng's  to  the  test,  and 
asking  a  poser  about  the  general  store  in  the  little  home 
town  in  a  remote  region  of  the  United  States,  and  the 
Schimmelpfeng  people  promptly  digging  out  the  indexed 
card,  with  every  last  detail  of  information,  including  the 
two  wells  in  the  garden,  one  of  which  was  unknown  to 
the  tourist?  These  stories  may  be  more  or  less  apocry- 
phal, but  there  is  abundant  evidence  that  Schimmel- 
pfeng's is  a  depository  of  an  enormous  mass  of  commer- 
cial information  on  every  country  in  the  world,  and  that 
the  information  gathered  by  its  agents  was  no  less  mili- 
tary than  commercial. 

The  German  Government  was  of  course  aware  of  the 
methods  adopted  in  gathering  the  information,  since 
its  own  agents  co-operated  in  the  work,  and  the  promi- 
nent merchants  and  manufacturers  of  Germany  were 
certainly  not  ignorant  of  the  methods.  Bribery  was  a 
time-honored  practice  in  the  gathering  of  military  in- 
formation, but  the  Governments  whose  agents  practised 
it  were  not  supposed  to  know  to  what  devices  their 
agents  abroad  were  having  recourse.  In  Schimmelpfeng's 
operations  it  was  for  the  first  time  recognised  nationally, 
almost  officially,  as  a  tolerable,  if  not  a  commendable 
practice  in  behalf  of  the  State's  commercial  development. 


S02         AMERICA  IN  WORLD  MARKETS 

It  was  not  long  until  all  the  factors  in  Germany's  ma- 
terial growth — ^banking,  diplomacy,  industry,  trading, 
transportation,  science — were  found  resorting,  each  in 
its  own  way,  to  special  forms  of  more  or  less  open  brib- 
ery. Every  German  banker,  diplomat,  manufacturer, 
merchant,  scholar,  artist,  having  a  mission  from  his 
Government,  or  working  for,  or  in  co-operation  with, 
the  great  banking,  industrial,  commercial  and  educational 
institutions  of  Germany,  besides  his  normal  avocation, 
has  had  a  subsidiary  commission  as  a  good  German  sub- 
ject. It  is  not  a  commission  as  spy — this  would  be  in- 
dignantly denied,  for  a  spy  has,  as  prime  duty,  the  hunt- 
ing up  of  military  plans  and  naval  secrets.  The  nature 
of  the  special  patriotic  activities  is  indicated  in  German 
documents  on  the  subject  published  in  Italy.  The  Gei- 
man  abroad,  invested  with  the  role  above  indicated — for 
of  course  not  every  individual  German  falls  into  the 
category,  or  is  given  the  explicit  or  implied  commission 
— is  instructed  "never  to  overlook  the  opportunity  to  in- 
vestigate regarding  economic  resources,  political  tenden- 
cies, military  forces,  etc. ;  also  to  make  notes  on  monetary 
reserves,  on  agricultural  production,  on  the  concentration 
of  cattle,  etc.,  in  the  foreign  country,  and  to  forward 
notes  and  documents  directly  through  German  official 
agents,  or  indirectly  through  German  banks  and  indus- 
trial establishments,  or  failing  these,  to  seek  out  Ger- 
man students,  ascribed,  with  scholarships,  to  the  foreign 
country,  as  these  are  in  direct  relation  with  the  Govern- 
ment." 

Immoral  practices  in  business  are  not  new  nor  are  they 
peculiar  to  any  country,  but  when  they  are  justified,  when 
they  are  erected  into  a  national  policy  and  are  made  an 
element  in  commercial  "warfare,"  it  is  time  that  the 


BRIBERY  IN  TRADE  PROMOTION        203 

free  peoples  take  action  to  prevent  the  whole  trend  of 
trade  and  commerce  being  permanently  degraded. 

Italy,  which  has  been  a  field  for  the  most  shameless 
exploitation  by  Germany,  is  more  affected  by  revela- 
tions regarding  corruption  in  the  domain  of  learning  than 
in  any  other  reach  of  human  activity.  What  Italians  call 
la  gernmnhnajdone  colturale,  "the  cultural  Germanisa- 
tion,"  of  Italy  has  hurt  the  feelings  of  a  whole  nation 
since  the  facts  have  been  laid  bare. 

Italy's  schools,  her  science  and  her  culture  have  been 
the  objects  of  German  bribery.  The  aim  was  to  impose 
upon  Italy  a  German  concept  of  the  world,  and  for  this 
purpose  the  mechanical  aspect  of  knowledge,  rather  than 
its  relations  with  the  spiritual  and  intellectual  life  was 
taught  from  German  textbooks.  Germans  re-wrote  the 
history  of  Rome.  They  gave  to  the  German  tribes  an 
exaggerated  place  among  the  rulers,  the  legislators,  the 
reformers,  the  rebuilders,  and  claimed  for  the  Germans 
the  development  of  the  Communes  and  the  glory  of  the 
Renaissance.  They  put  all  the  men  of  history  to  the 
German  test — color  of  eyes  and  hair,  size  of  body,  facial 
angle.  Herr  Professor  Woltmann  proved  in  this  way 
that  Michelangelo  Buonarotti  and  Leonardo  da  Vinci, 
the  glories  of  Italian  art  and  science,  were  good  Ger- 
mans whose  correct  names  were  Bonroth  and  Winke. 

Italian  officials  affirm  that  the  Germans  had  organised 
an  "Artistic-Economic  General  Staff"  for  world  con- 
quest. The  chief  of  staff  was  Wilhelm  Bode,  head  of  the 
Royal  Museum  of  Berlin.  Bode's  run-in  with  famous  art 
critics  of  Europe  a  few  years  ago,  in  connection  with  the 
modem  wax  bust  he  had  purchased  and  which  he  in- 
sisted in  ascribing  to  Leonardo,  threw  a  glow  of  light  on 
the   artistic   and   ethical  principles   of   that   particular 


204  AMERICA  IN  WORLD  MARKETS 

scholar.  Under  the  direction  of  Bode  there  operated  in 
Italy  many  German  professors,  including  Rolfs,  Eckhart 
and  Frey.  Rolfs,  it  has  been  publicly  announced,  bribed 
a  museum  watchman  in  central  Italy,  purloined  a  manu- 
script which  an  Italian  artist  had  in  preparation  regard- 
ing the  interpretation  of  certain  drawings,  and  published 
it  as  his  own.  It  reached  a  point  where  the  Italian  au- 
thorities had  to  put  the  German  professors  on  their  word 
of  honor  not  to  pilfer,  or  publish  without  permission, 
before  allowing  them  to  inspect  Italian  art  treasures. 
Thus  Professor  Frey,  lecturer  in  Berlin  on  the  history 
of  art,  formally  pledged  his  word  of  honor  before  be- 
ing entrusted  with  the  Michelangelo  charts  in  the  Lau- 
rentian  museum  in  Florence ;  but  he  broke  his  word  and 
published  the  charts.  The  same  professor  is  charged 
with  having  paid  a  bribe  of  30,000  marks  to  get  posses- 
sion of  the  Vasari  correspondence. 

While  the  German  professors  were  an  object  of  de- 
rision to  the  great  body  of  the  Italian  public,  it  must 
be  admitted  that  they  cast  a  strange  glamour  over  a  mul- 
titude of  Italy's  scientific  men.  A  sort  of  oriental  wor- 
ship was  created  around  them  and  they  were  the  central 
stars  of  a  galaxy  of  Italian  planets  and  satellites.  Money 
was  spent  lavishly.  Gatherings  of  Italian  "scientists" 
were  taken  on  junketing  trips  through  Germany  and 
large  numbers  of  Italian  students  received  German 
scholarships  and  went  to  Germany  to  study. 

Germany  established  scientific  and  artistic  institutions 
in  Italy,  such  as  the  Istituto  Germanico  of  Rome  and  the 
Istituto  Germanico  d'Arte  of  Florence.  These  institu- 
tions were  centres  for  the  diffusion  of  German  propa- 
ganda ;  Italian  scholars  and  artists  being  assembled  there 


BRIBERY  IN  TRADE  PROMOTION        205 

to  imbibe  German  imperial  ideas  from  German  profes- 
sors. 

Professor  von  Manteuffel  was  the  head  of  the  Insti- 
tute in  Florence  when  the  war  began.  Being  a  professor 
and  thus  a  non-combatant,  he  was  not  expelled  from 
Italy,  especially  as  over  his  house  in  Florence  he  hoisted 
the  American  flag,  without  any  right  or  reason,  except 
to  bluff  the  Italian  authorities.  It  was  soon  noted  that 
his  house  was  being  made  the  rendezvous  of  the  German 
spies  and  suspected  persons  in  Florence  and  the  police 
decided  to  make  a  raid.  They  found  arms  and  uniforms 
and  documents  showing  that  the  tolerated  professor  was 
an  officer  in  the  German  army  serving  in  a  military  func- 
tion. Von  Manteuffel  had  no  apologies  to  make.  He  was 
defiant  to  the  end.  He  curtly  ended  all  discussion  with 
the  Italian  police  by  exclaiming,  "Art  and  science  are 
political  forces." 

The  German  ambassador  in  the  foreign  country,  as  the 
United  States  Government  revealed  in  the  case  of  Count 
von  Bernstorff,  was  the  expert  leader  of  the  organised 
spy  system,  the  briber  and  the  promoter  of  crime  to  fur- 
ther the  interests  of  his  country.  His  whole  training  and 
his  manner  of  operation  as  the  head  of  an  organisation 
whose  aim  was  to  take  unfair  advantage  of  others,  and 
to  do  this  ruthlessly,  relentlessly,  atrociously,  with  un- 
tiring persistence  and  infinite  ingenuity,  are  an  indica- 
tion of  the  well-defined  plans  for  beating  down  compe- 
tition in  the  domain  of  trade  as  well  as  in  that  of  politics 
and  diplomacy. 

That  there  are  two  codes  of  business  morals  in  vigor 
— American  plain-dealing  methods  as  contrasted  with 
Germany's  spy  system  methods — has  long  been  known 
to  those  having  intimate  knowledge  of  the  international 


«06         AMERICA  IN  WORLD  MARKETS 

trade.  Lack  of  exact  information  on  the  German  code, 
however,  caused  it  to  be  made  light  of  and  readily  over- 
looked. We  know  more  to-day  about  Germany's  busi- 
ness spies  and  the  systematic  way  in  which  the  German 
Government  had  organised  all  its  resources — diplomatic, 
military  and  commercial — for  the  furtherance  of  the 
"economic  penetration"  in  Germany,  so  that  to  ignore  it 
further  would  be  stretching  the  ostrich  method  in  busi- 
ness to  the  point  of  stupidity. 

The  experts  of  Europe  are  asking  if  Germany,  after 
forcing  practically  the  whole  world  to  take  up  arms,  will 
force  it  also  into  the  new  form  of  warfare  in  which  the 
whole  resources  of  the  American  and  other  governments 
must  be  employed,  not  indeed  to  imitate  the  German 
methods,  but  to  uncover  them  and  to  keep  the  world  safe 
for  honesty  in  trade.  The  day  has  gone  by  for  making 
light  of  Germany's  underhand  operations. 

The  American  business  man's  frank  smile,  his  hearty 
hand-clasp,  his  honest  methods  and  his  scorn  of  what 
is  mean  and  underhand  do  not  disarm  the  German;  in- 
deed they  encourage  him  in  his  confidence  that  guile  and 
underhand  dealing  will  make  an  easy  victim  of  frank- 
ness and  simplicity.  And  yet  American  sincerity  must 
be  vindicated,  must  be  assured  of  permanent  victory.  To 
this  end  American  business  must  lend  its  utmost  efforts 
to  making  sure  that  the  system  which  has  given  birth 
to  the  spy  methods  in  trade  must  be  destroyed  at  its 
roots. 


CHAPTER  XIV 

HOW  TO  KEEP  AMERICAN  INDUSTRY  AMERICAN 

Revelations  of  Extent  of  German  Commercial  Domina- 
tion— Consideration  of  Measures  That  May  Prevent 
Repetition  in  Future — British  Plans  for  Protecting 
Trade — German  Metals  Company  Controlled  World's 
Markets — Incident  of  St.  Andrew's  Bay — For  a  Mon- 
roe Doctrine  of  Commerce. 

No  one  dreamed  before  the  war  that  the  foreigner  had 
such  a  strangle-hold  on  American  industry  and  com- 
merce. Germany  alone,  according  to  Attorney  General 
A.  Mitchell  Palmer,  former  Alien  Property  Custodian, 
had  a  stake  here  worth  billions  of  dollars.  Through  her 
control  of  non-ferrous  metals  she  was  gradually  assum- 
ing domination  of  the  word's  steel  and  iron  markets. 
She  was  potent  in  our  mining,  in  our  manufacturing, 
in  our  cotton,  our  wool,  our  staples  of  all  kinds,  and  in 
almost  every  domain  of  our  trade.  Without  adequate 
return,  and  practically  on  the  credit  reputation  she  had 
arrogantly  awarded  to  herself,  she  was  using  our  money, 
our  banking  resources  and  facilities  for  her  own  enrich- 
ment out  of  American  enterprise,  labor  investment  and 
national  resources.  The  German-owned  industrial  es- 
tablishments in  America,  Mr.  Palmer  has  said,  were  spy 
centres  "filled  with  agents  of  Germany,  long  plotting 
against  the  safety  of  the  United  States." 

The  war  fortunately  brought  us  exact  and  valuable 

207 


«08  AMERICA  IN  WORLD  MARKETS 

information  on  this  astounding  condition  of  affairs. 
With  the  war  now  at  an  end  we  have  unfortunately  no 
assurance  that  we  have  got  to  the  lx)ttom  of  the  German 
conspiracy  against  our  business.  The  bilHons  of  dollars 
of  holdings  here,  which  there  is  good  reason  to  believe 
are  German-owned  or  German-controlled — not  as  the  le- 
gitimate and  honest  investment  or  created  wealth  of  the 
individual  German,  entitled  of  course  to  every  guaran- 
tee of  right  of  ownership  or  possession,  but  the  acquisi- 
tion in  the  interest  of  the  German  State  through  far- 
sighted  scheming  of  German  Government,  German  bank- 
ing system  and  German  industrial  system  in  combination 
— have  not  all  been  seized  by  our  Government.  It  is 
difficult  to  get  hold  of  them,  for  they  have  been  carefully 
disguised.  We  cannot  but  labor  under  the  suspicion 
that  they  are  there  and  that  they  contribute  a  continuing 
menace. 

England  has  enacted  legislation  to  permit  a  close  su- 
pervision over  aliens  who  undertake  to  engage  in  certain 
lines  of  industry  and  commerce  within  British  jurisdic- 
tion and  over  alien  corporations  and  aliens  entering  into 
British  corporations.  But  England's  case  is  different 
from  ours.  There  was  no  such  proportionate  number  of 
German-owned  or  German-controlled  businesses  estab- 
lished in  England.  In  fact  England  had  a  much  larger 
stake  in  Germany  than  Germany  in  England. 

We  have  in  this  regard  a  special  problem  all  our  own. 
The  foreigner  has  had  his  tentacles  right  into  our  vitals. 
If  he  keeps  them  there,  or  if  a  new  cancerous  growth 
shoots  its  roots  out  in  a  similar  fashion,  we  may 
not  again  have  a  chance  to  have  the  danger  revealed  to 
us  and  to  be  able  to  eradicate  it  such  as  the  war  pro- 
vided. 


TO  KEEP  OUR  INDUSTRY  AMERICAN    209 

How  then  are  we  going  to  make  sure  that  American 
industry  and  commerce  will  hereafter  be  kept  safe  for 
America?  Mr.  A.  Mitchell  Palmer,  when  this  query- 
was  put  to  him,  said :  "I  am  inclined  to  believe  that  the 
fact  of  our  exposing  and  eradicating  what  I  consider  to 
be  the  great  bulk  of  the  German  holdings  here — we  have 
caught  some  $800,000,000  of  German  property — will  act 
as  a  powerful  deterrent  in  the  future.  We  have  learned 
our  lesson,  and  it  is  for  us  to  profit  by  it.  What  special 
measures  may  be  adopted  to  prevent  a  recurrence  of  such 
an  evil  of  the  systematic  planting  of  an  economic  force 
in  America  with  the  deliberate  intention  of  employing 
it  for  attack  against  our  freedom  of  action,  and  for  the 
undermining  of  our  ideals  and  our  whole  scheme  of  ex- 
istence, is,  of  course,  quite  another  question.  Congress 
will  have  the  say  in  that  matter. 

"In  England  certain  bills  have  been  prepared,  the  aim 
of  which  seems  to  be  the  solution  of  a  similar  prospective 
problem  in  that  country,  such  as  the  Non-Ferrous  Metals 
Bill,  which  prohibits  dealing  or  trading  in  metals  other 
than  steel  and  iron  in  Great  Britain  except  by  special 
license.  The  special  recommendations  that  may  be  made 
to  Congress  with  a  like  aim  have  not  yet  been  decided 
upon." 

The  State  Department  has  announced  that  the  value 
of  the  property  seized  by  the  Alien  Property  Custodian 
is  near  $800,000,000  and  that  claims  of  Americans 
against  Germany  and  her  former  allies  already  filed  with 
the  Department,  total  about  $750,000,000,  with  some 
further  claims  still  expected. 

"The  Department,"  it  was  officially  stated  on  March 
8,  1919,  "for  several  months  has  had  a  large  force  en- 
gaged in  the  compilation  of  American  losses,  which  have 


210  AMERICA  IN  WORLD  MARKETS 

been  reported  to  it  in  response  to  published  requests  for 
a  very  brief  statement  of  losses  or  injuries  of  Americans 
attributable  to  the  enemy.  Opportunity  for  a  more  for- 
mal detailed  statement  of  these  claims  will  be  given  later 
when  the  new  regulations  for  their  submission  are  pre- 
pared. 

"The  claims  are  divided  into  two  classes — those  aris- 
ing from  submarine  warfare,  and  those  attributable  to 
other  acts  of  the  Central  Empires. 

"Included  in  the  items  comprising  claims  growing  out 
of  submarine  warfare,  are  losses  alleged  for  death  and 
injury  of  American  citizens;  losses  suffered  in  the  de- 
struction of  or  damage  to  American  vessels;  losses  suf- 
fered in  connection  with  American  cargoes  in  both 
American  and  foreign  bottoms;  the  loss  of  much  valu- 
able personal  property  other  than  cargoes,  and  many  mis- 
cellaneous items  of  loss  and  injury. 

"The  losses  due  to  other  acts  of  Germany  and  Aus- 
tria-Hungary include  destruction  and  requisition  of 
American  property  in  both  enemy  territory  and  territory 
occupied  at  various  times  by  enemy  forces.  American 
citizens  and  concerns  at  the  outbreak  of  the  war  had 
about  $300,000  worth  of  property  in  enemy  countries, 
and  those  which  have  been  under  enemy  occupation. 
Heavy  losses  have  resulted  in  connection  with  this  prop- 
erty due  to  war  measures  taken  by  the  Central  Powers. 

"The  American  claims  in  number  will  run  well  into 
the  thousands." 

The  general  public,  distracted  by  the  succession  of 
spectacular  events  in  the  great  cataclysm  of  the  last  five 
years  had  not,  seemingly,  been  impressed  by  the  revela- 
tion of  conditions  unearthed  since  the  office  of  Alien 
Property  Custodian  was  created.    It  was  doubtful  even 


TO  KEEP  OUR  INDUSTRY  AMERICAN    211 

if  the  business  men  of  the  country  had  given  adequate 
attention  to  the  seriousness  of  the  danger  that  threatened 
the  country  as  a  result  of  the  hold  which  Germany  had 
obtained  on  its  industry  and  commerce.  And  yet,  with- 
out a  certain  amount  of  public  interest  in  the  matter, 
the  remedies  which  the  situation  demanded  might  be 
overlooked  or  very  imperfectly  applied.  For  peoples  had 
short  memories  and  the  abject  attitude  of  Germany 
might  make  us  minimise  her  past  offences,  if  not  condone 
them  somewhat.  Mr.  Palmer,  realising  the  true  condi- 
tion of  affairs,  had  repeatedly  invited  public  attention  to 
the  subject  and  had  emphasised  the  importance  of  the 
whole  country  being  alive  to  it.  Germany  had  entrenched 
an  industrial  and  commercial  army  of  invasion  in  this 
country,  and  we  were  not  yet  wholly  rid  of  it.  German 
industrial  penetration  had  been  "a  knife  at  the  throat  of 
America." 

With  an  investment  of  only  $46,000,000  Germany  had 
gained  an  important  measure  of  supremacy  in  the  world's 
metal  markets,  and  had  thus  become  a  menace,  not  only 
to  the  trade,  industry  and  commerce  of  all  the  other  na- 
tions, but  to  their  very  independence.  Germany  had 
implanted  in  America  one  of  her  pivotal  organisations 
for  the  control  of  the  world's  metal  markets.  The  Amer- 
ican Metals  Company  was  the  heart  of  this  organisation, 
cloaked  to  some  extent  by  a  complexity  of  incorporations 
with  stock  ownerships  difficult  to  trace.  From  this  com- 
pany there  ramified  a  score  or  more  of  branches  reaching 
out  for  some  measure  of  control  of,  or  special  interest 
in,  the  American  markets  in  gold,  silver,  copper,  mer- 
cury, tin,  lead,  zinc,  antimony  and  other  leading  metals. 
This  German  group  in  America  was  one  of  a  chain  of 
groups  around  the  earth,  giving  to  Germany  a  certain 


212  AMERICA  IN  WORLD  MARKETS 

primacy  in  the  markets  for  all  the  more  valuable  metals 
which  in  turn  must  ultimately  assure  to  her  a  domination 
over  the  world's  markets  for  steel  and  iron,  since  these 
to-day  are  dependent  on  the  more  valuable  metals. 

What  was  true  of  the  metals  industries  was  true  also 
in  greater  or  less  measure  of  all  the  principal  lines  of 
industry  and  commerce  of  the  United  States.  Mr.  Pal- 
mer found  that  the  great  German  army  of  industrial  and 
commercial  invasion,  comprising  some  200  principal 
companies,  "ran  the  entire  gamut  of  American  indus- 
tries." 

The  great  German  industrial  and  commercial  structure 
built  up  in  the  United  States  in  the  last  twenty-five  years 
and  reaching  out  also  over  Porto  Rico,  the  Virgin  Isl- 
ands, Hawaii  and  the  Philippines,  was  growing  in  recent 
years  at  an  enormous  rate  and  when  the  war  began  hajd 
reached,  Mr.  Palmer  stated,  a  present  money  value  of 
nearly  two  billion  dollars  and  a  potential  economic  and 
political  value  of  many  billions  more. 

The  German  interests  of  the  American  Metals  Com- 
pany and  of  other  affiliations  of  the  German  Metall- 
Gesellschaft,  "which  for  some  years  had  dominated  the 
entire  metals  market  of  the  world,"  were  taken  over  by 
the  Alien  Property  Custodian,  who  has  stated  that  these 
firms  had  managed  during  nearly  three  years  of  war  to 
get  such  vast  amounts  of  metals  into  Germany  as  to  fur- 
nish an  important  part  of  the  strength  which  enabled 
Germany  and  her  allies  to  maintain  their  fighting  power. 
He  also  found  that  stocks  of  copper  had  been  accumu- 
lated to  be  sold  to  Germany  after  the  war. 

"Germany  had  aimed  to  control  our  plants  that  were 
essential  for  our  work,"  Mr.  Palmer  said.  "Great  steel 
and  iron  mills  were  sending  their  profits  out  of  America 


TO  KEEP  OUR  INDUSTRY  AMERICAN    213 

back  to  Germany.  Great  woollen  mills  in  New  Jersey 
were  pouring  their  dividends  into  coffers  in  Berlin.  Great 
metal,  mining  and  mineral  companies  all  over  the  United 
States,  owned  or  controlled  by  the  Germans,  were  work- 
ing, not  for  the  United  States,  but  for  Germany.  And 
these  German  industries  established  here,  drawing  on 
American  labor  and  operating  usually  with  American 
funds  obtained  on  credit,  were  not  merely  an  economic 
injury  to  this  country;  they  were  also  an  enemy  spy 
system  in  our  midst  aiming  at  our  destruction. 

"Down  in  Florida,"  Mr.  Palmer  went  on,  "the  harbor 
not  far  from  Pensacola,  known  as  St.  Andrew's  Bay, 
perhaps  the  finest  harbor  in  the  Gulf  of  Mexico,  and  the 
nearest  one  on  American  soil  to  the  Panama  Canal, 
proved,  as  a  result  of  our  investigations,  to  be  controlled 
by  German  money.  The  Germans  had  bought  thousands 
of  acres  of  land,  and  had  incorporated  the  German-Amer- 
ican Lumber  Company,  the  ownership  of  which  was  vest- 
ed in  a  member  of  the  German  Kaiser's  family  back  in 
Berlin,  who  had  never  put  a  foot  on  it.  They  had  poured 
millions  of  dollars  into  the  property,  had  built  a  fine 
wharf,  had  purchased  the  right  of  way  over  all  lands 
leading  to  the  shore,  so  that  the  United  States  Govern- 
ment itself  could  not,  in  pre-war  times,  have  used  that 
harbor  for  communication  with  Panama  without  doing 
business  with  Germany.  It  was  from  the  Foreign  Office 
in  Berlin  that  this  property  was  directed.  The  people 
who  directed  it  were  the  same  people  who  had  con- 
structed, in  those  islands  of  ours  of  such  vital  strategic 
importance  to  us,  the  Virgin  Islands,  formerly  the  Dan- 
ish West  Indies,  a  steamship  terminal  for  the  Hamburg- 
American  Line,  with  a  solid  masonry  structure  extend- 
ing for  ten  feet  around  it,  recalling  the  big  gun  emplace- 


gl4  AMERICA  IN  WORLD  MARKETS 

ments  the  Germans  had  in  peace  times  built  in  France 
on  properties  they  had  secured  for  commercial  purposes. 

"Let  us  keep  St.  Andrew's  Bay  in  our  minds,  as  an 
object  lesson  of  the  highest  importance.  Let  us  not 
forget  that  Germany  had  planted  her  spies  in  the  Pitts- 
burgh industries,  in  commercial  and  transportation  enter- 
prises in  New  York,  in  Chicago,  in  the  West  and  indeed 
all  over  the  country,  and  that  when  she  unloosed  war 
against  the  freedom  of  the  world,  and  before  we  entered 
the  conflict,  she  began  actually  to  wage  that  war  in  part 
on  our  own  soil,  through  her  agents  and  her  forces  in 
those  great  industries,  and  that  she  was  waging  that  war 
no  less  against  us  than  against  her  avowed  adversaries. 
If  we  keep  this  in  mind  we  shall  be  all  the  more  resolute 
in  insisting  on  cleaning  out  root  and  branch  the  evil 
growths  planted  by  the  enemy  foreigner  in  our  land  and 
on  making  such  a  clean  sweep  that  neither  Germany  nor 
any  other  power  will  be  inclined  again  to  attempt  any 
similar  aggression  against  our  independence  and  our  in- 
tegrity. 

"Stirred  by  entirely  just  sentiments  of  indignation,  we 
shall  also  be  disposed  to  hold  up  the  hands  of  the  nation's 
spokesmen  in  Congress  in  formulating  the  laws  that  will 
remedy  the  present  situation  and  best  protect  us  in  the 
future.  We  entered  the  war  in  behalf  of  the  ideals  of 
Christian  civilisation,  and  we  cannot  tolerate  the  foul 
principles  of  those  who  would  enslave  others  being  estab- 
lished in  our  own  territory  and  in  our  own  domestic  life. 
We  hope  to  bring  America,  and  all  that  America  means, 
to  all  the  world  and  to  see  the  ideals  for  which  America 
stands  spread  around  the  globe,  liberty  for  every  one 
everywhere,  liberty,  national  and  individual,  so  that 
America  will  be  the  symbol  of  peace,  of  welfare  and 


TO  KEEP  OUR  INDUSTRY  AMERICAN    216 

happiness  for  mankind.  Accordingly  we  must  do  well, 
and  to  completion,  the  work  of  destroying  the  enemy  in- 
cubus and  spy  system  to  which  we  have  set  ourselves." 

In  order  that  there  might  be  accurate  and  general 
understanding  of  the  scope  of  his  work,  Mr.  Palmer  de- 
sired to  draw  attention  to  the  fact  that  he  was  rooting 
out  only  such  enemy  alien  interests  in  American  industry 
and  commerce  as  could  be  regarded  as  strictly  foreign 
and  corporate  and  as  representing  part  of  the  systematic 
and  hostile  encroachment  of  a  foreign  state  on  American 
rights  and  economic  well-being.  Thus,  although  the  prop- 
erty here  of  individual  alien  enemy  investors  might  be 
under  sequestration  by  the  Alien  Property  Custodian,  it 
was  not  his  purpose  to  confiscate  that  property,  or  to 
dispose  of  it  to  American  citizens  by  sale,  unless  it  could 
be  shown  that  such  property  was  held  under  the  control 
of,  or  in  the  interests  of  the  hostile  State. 

American  business  men,  it  would  seem,  are  alone  qual- 
ified to  handle  this  problem  in  an  effective  way.  They 
are  in  the  best  position,  if  they  will  unite  for  the  pur- 
pose, to  learn  the  facts,  to  watch  developments  where 
their  suspicions  are  aroused,  to  build  up  a  body  of  in- 
formation by  comparing  notes.  With  the  co-operation 
of  the  banks  and  of  the  governing  authorities,  they  would 
constitute  the  most  valuable  means  of  warding  off  the 
alien  dangei^.  Political  influence,  diplomatic  suscepti- 
bility and  the  thousand  and  one  influences  and  motives 
that  make  it  difficult  for  Governments  to  render  adequate 
service  in  such  matters  would  thus  be  obviated. 

American  business  men  can  lead  also  in  the  establish- 
ing of  a  new  world  code  of  business  morality.  They 
might  be  the  promoters  of  a  Commercial  League  of 
Nations  to  codify  and  uphold  commercial  laws,  to  pro- 


216  AMERICA  IN  WORLD  MARKETS 

claim  a  Monroe  Doctrine  of  Commerce,  to  throw  up  a 
barrier  against  all  those  whose  designs  are  inimical  to 
commercial  honesty  and  rectitude.  As  they  develop  the 
get-together  habit  and  as  leaders  come  forth  to  blaze  the 
way,  there  is  every  reason  to  expect  that  trade  and  com- 
merce will  be  elevated  to  a  new  plane  and  that  conditions 
will  be  created  conducive  to  permanent  peace  and  to 
world  welfare. 

In  the  preparing  of  the  new  framework  of  civilisation 
America  is  summoned  to  the  position  of  leadership. 


PART  III 
WORLD  PLANS  AND  FOREIGN  TRADE 

CHAPTER  I 

EUROPEAN  OUTLOOK  ON  THE  NEW  ERA 

Old  Individualistic  System  of  Trading  Has  Gone — Gov- 
ernments Will  Participate  in  Industry  and  Trade — 
Self-Sufficiency  as  a  Political  Necessity — Control  of 
Materials — Protection  of  Key  Industries — General 
Agreement  Reached  at  Paris  Economic  Conference. 

The  striking  fact  manifested  in  all  discussions  on  re- 
construction in  the  countries  that  have  recently  been  at 
war  in  Europe  is  that  it  is  realised  that  the  old  individ- 
ualistic system  of  trading  cannot  be  continued  as  in  the 
past.  Governments  hereafter  are  going  to  take  part  in 
trade  and  industry.  Most  of  them  feel  that  they  are 
forced  to  do  so  in  order  to  be  able  to  pay  for  the  war. 

All  the  nations  have  had  it  brought  home  to  them  how 
perilous  it  is  for  countries  to  be  caught  unprovided  and 
to  be  wholly  dependent  on  other  countries  for  the  essen- 
tials in  the  way  of  raw  materials  and  products  needed  for 
vital  industries.  They  have  realised,  consequently,  that 
it  is  incumbent  on  them  to  aim  at  economic  independence 
and  for  this  purpose,  and  as  a  political  necessity,  to  strive 
to  assert  and  to  maintain  their  own  "self-sufficiency" 
and  to  control  as  far  as  possible  the  raw  materials  which 

217 


218  AMERICA  IN  WORLD  MARKETS 

they  most  vitally  need  and  to  protect  those  "key"  indus- 
tries on  which  the  production  of  materials  for  war 
making  and  of  materials  essential  to  the  life  of  the  State 
may  depend. 

When  the  armistice  was  signed,  the  war  had  already 
added  new  debts  of  some  $145,000,000,000  to  the  obli- 
gations of  the  principal  European  nations  which  had  en- 
gaged in  it,  Great  Britain,  France,  Italy,  Russia,  Ger- 
many and  Austria-Hungary.  An  examination  of  the 
detailed  figures  would  indicate  that  Great  Britain  was 
the  heaviest  loser  in  this  regard  and  Germany  the  next 
with  respectively  37  and  36  billions  of  dollars  of  new 
debts.  The  figures  for  both  countries,  however,  com- 
prise loans  made  to  their  allies  and  stocks  of  war  materi- 
als utilisable  in  peace  to  the  value  of  many  billions  of 
dollars.  France  appears  in  the  list  with  a  new  debt  of 
24  billions.  As  a  matter  of  fact  it  is  declared  by  the 
French  authorities  that  the  war  imposed  on  France,  not 
merely  the  greatest  sacrifices  in  blood  and  in  property, 
but  also  the  most  crushing  financial  burden.  Her  war 
expenses  are  expected  to  reach  $36,400,000,000  and,  in 
addition  to  this,  her  exceptional  expenses  arising  out  of 
the  war  are  estimated  at  5  billions  more.  As  against 
this  total  of  $41,400,000,000,  the  resources  of  France 
are  placed  at  only  $31,600,000,000.  Italy's  war  debt  of 
$9,250,000,000,  if  added  to  her  pre-existing  debt  of  more 
than  $2,750,000,000,  makes  a  total  representing  two- 
thirds  of  her  entire  national  wealth.  One  of  the  chief 
after-war  problems  of  all  these  countries  is  to  devise 
means  of  relieving  themselves  to  some  extent  of  these 
staggering  burdens. 

The  measures  to  be  taken  in  the  period  immediately 
after  the  war  by  the  Allied  countries  were  outlined  in  the 


EUROPEAN  OUTLOOK  ON  THE  NEW  ERA  219 

Economic  Conference  at  Paris  of  June,  19 16,  when  the 
Allies  agreed  to  concede  to  each  other  prior  claims  on 
materials  needed  for  reconstruction  and  to  share  their 
natural  resources  among  themselves,  in  preference  to 
other  countries,  during  the  whole  period  of  commercial, 
industrial,  agricultural  and  maritime  reconstruction  fol- 
lowing the  war,  and  to  fix  a  time  during  which  in  a  con- 
certed manner  they  should  defend  their  commerce,  in- 
dustry, agriculture  and  navigation  against  dumping  and 
other  unfair  methods  of  competition.  During  the  period 
fixed  the  commerce  of  Germany  and  her  allies  was  to  be 
submitted  to  special  treatment,  and  goods  originating 
from  them  to  be  subjected  either  to  prohibitions  or  to 
special  methods  of  control.  The  agreement,  although  ac- 
cepted as  having  a  certain  binding  force,  was  never  for- 
mally ratified  by  the  legislatures  of  the  various  nations 
which  had  been  represented  at  the  Conference.  The  pol- 
icy of  imposing  even  temporary  economic  restrictions 
on  Germany  and  her  former  allies  was  opposed  by  the 
American  delegates  to  the  Peace  Conference. 

A  review  of  the  ways  in  which  other  leading  countries 
are  facing  the  new  outlook  and  of  the  means  they  are 
considering  or  putting  into  effect  for  adapting  them- 
selves to  the  changed  conditions  and  for  turning  to  ad- 
vantage the  commercial  opportunities  that  are  in  sight 
may  serve  to  clarify  our  own  views  and  to  guide  in  the 
drawing  up  of  plans.  Henceforth  other  peoples'  prob- 
lems are  ours  as  well. 


CHAPTER  II 


GREAT  BRITAIN 


Extensive  Plans  Already  Matured — Ministry  of  Recon- 
struction Has  Started  New  Era  Projects — Combina- 
tions in  Banking  and  Industrial  Corporations — Report 
of  Committee  on  After- War  Policy — Government  As- 
sistance to  Certain  Industries — British  Labor  Party 
for  Nationalisation  Scheme. 

None  of  the  European  countries  appears  to  have  elab- 
orated such  extensive  plans  for  the  new  period  as  has 
Great  Britain.  That  country  established  a  Ministry  of 
Reconstruction  to  deal  with  the  main  problems.  Various 
committees  under  its  direction  have  been  investigating 
in  the  home  field  special  questions  of  commerce  and  pro- 
duction, including  the  supply  of  materials ;  finance,  ship- 
ping and  common  services;  labor  and  industrial  organi- 
sation; rural  development;  machinery  of  government; 
health  and  education;  housing  and  internal  transporta- 
tion. The  Ministry  is  assisted  by  an  Advisory  Council 
with  regard  to  the  international  aspects  of  trade;  its  work 
is  chiefly  delegated  to  its  committees  which  have  taken  up 
and  reported  in  detailed  fashion  on  questions  of  raw 
materials,  financial  facilities  for  British  commerce,  the 
preservation  of  essential  industries,  combinations  and 
trusts,  the  establishment  of  new  industries,  the  develop- 
ment of  foreign  markets,  improvements  in  trade  organi- 
sations for  the  purpose  of  more  economical  production, 

220 


GREAT  BRITAIN  221 

distribution  and  marketing.  This  Ministry  has  already- 
undertaken  an  important  scheme  of  rural  development, 
building  light  railways  through  the  country  districts  and 
utilising  for  the  purpose  great  quantities  of  railroad  ma- 
terial used  by  the  British  army  in  France. 

Great  Britain  also  established  a  new  Department  of 
Overseas  Trade,  also  known  as  the  Development  and 
Intelligence  Department.  It  is  jointly  associated  with 
the  Board  of  Trade  and  the  Foreign  Office  and  corre- 
sponds in  its  functions  to  the  Bureau  of  Foreign  and 
Domestic  Commerce  of  the  Department  of  Commerce  in 
the  United  States.  The  Overseas  Department  has  in- 
troduced reforms  in  the  consular  service  and  has  planned 
the  extension  of  the  service  of  trade  agents  and  consti- 
tutes practically  a  Department  of  Commerce  and  Indus- 
try under  the  Board  of  Trade  and  the  Foreign  Office. 

Great  Britain,  also  through  the  Board  of  Trade,  has 
introduced  important  measures  providing  for  changes  in 
trade  mark  and  patent  legislation,  to  eliminate  the  abuses 
which  had  been  committed  by  foreigners,  and  particularly 
by  Germans. 

An  act  was  passed  by  the  British  Parliament  in  191 7 
called  the  Companies'  Act,  which  imposes  registration  of 
the  real  names  and  surnames,  nationality,  nationality  of 
origin,  usual  residence  and  other  business  occupations  of 
directors  of  all  companies  registered  in  Great  Britain,  or 
with  an  established  place  of  business  in  that  country,  and 
doing  business  under  names  other  than  their  true  names. 
This  measure  was  intended  to  prevent  the  foreigner  sur- 
reptitiously getting  a  footing  in  British  industry. 

The  British  Government  also  has  given  detailed  atten- 
tion to  the  question  of  technical  education,  and  the  Board 
of  Education  has  established  working  plans  for  promot- 


222         AMERICA  IN  WORLD  MARKETS 

ing  industrial  and  scientific  research.  Parliament  made 
a  grant  of  one  million  pounds  sterling  to  be  expended 
for  industrial  and  scientific  research  and  plans  are  being 
made  for  developing  in  Great  Britain  science  and  indus- 
try according  to  the  most  modern  and  approved  methods 
of  superior  education.  The  German  method  of  pursuing 
scientific  research  and  experimentation,  not  in  a  principal 
way  in  the  laboratories  of  colleges  and  universities,  but 
in  the  manufacturing  plants  throughout  the  country,  will 
also  be  followed  in  Great  Britain,  and  indeed  by  the 
nations  generally. 

British  joint  stock  banks  have  shown  a  disposition 
to  concentrate  and  amalgamations  have  been  effected 
bringing  into  eight  groups  the  joint-stock  banks  which 
had  controlled  about  eighty-five  per  cent  of  the  total  de- 
posits in  the  commercial  credit  banks  of  this  class.  The 
tendency  is  also  seen  in  other  countries.  How  Ger- 
many led  in  the  development  and  concentration  of  credit 
banks  has  already  been  described. 

Important  combinations  were  also  effected  in  the 
Sheffield  steel  industry  and  in  the  brewing  and  brick 
manufacturing  industries  and  others  were  quickly 
brought  about  in  the  industries  which  undertook  to  manu- 
facture tlie  products  which  had  formerly  been  received 
from  Germany  and  other  enemy  countries. 

By  Royal  Charter  on  April  21,  191 7,  the  British  Trade 
Corporation  was  organised,  v/ith  a  capital  of  £10,000,- 
000,  to  assist  British  industry  and  trade  in  connection 
with  new  overseas  undertakings,  contracts  and  obliga- 
tions, in  somewhat  the  same  manner  as  the  German  in- 
dustrial banks  had  been  able  to  do  under  Government 
direction.  The  Corporation  is  authorised  "to  obtain  and 
work   concessions"   and    "to   acquire   and   dev<elop    re- 


GREAT  BRITAIN  «2S 

sources"  in  any  part  of  the  world.  A  Portuguese  branch 
of  this  Corporation  has  been  formed  for  the  control  of 
the  trade  of  the  Portuguese  colonies. 

An  organisation  known  as  the  Federation  of  British 
Industries  had  previously  been  founded  to  assist  the 
Government  in  framing  industrial  legislation,  in  studying 
labor  troubles  and  in  promoting  British  trade  interests 
by  organised  effort.  The  interests  of  capital  and  labor 
are  considered  unitedly,  with  the  obvious  and  entirely 
modern  and  desirable  plan  of  treating  them  henceforth 
as  an  indivisible  whole  in  industry  and  commerce. 

The  British  Empire  Producers'  Organisation  was 
established  for  the  purpose  of  bringing  about  the  eco- 
nomic self-sufficiency  of  the  British  Empire  and  of  pro- 
moting the  development  of  Imperial  resources  to  this 
end,  or  in  other  words  of  "organising  British  industries 
on  an  Empire  basis." 

In  191 7  the  British-Italian  Corporation  was  founded 
to  promote  closer  trade  relations  between  Great  Britain 
and  Italy.  It  is  expected  that  this  Corporation  will  pre- 
vent the  Germans  from  again  dominating  in  the  indus- 
trial life  and  commercial  finances  of  the  Italian  penin- 
sula. 

The  Committee  on  Commercial  and  Industrial  Policy 
After  the  War  was  the  title  of  a  very  important  investi- 
gating body,  at  the  head  of  which  was  Lord  Balfour  of 
Burleigh.  It  was  appointed  in  July,  191 6,  and  has  al- 
ready rendered  a  report  to  which  much  consideration  has 
been  accorded  in  Great  Britain. 

The  Committee  had,  among  its  many  functions,  to  in- 
vestigate,— I,  the  industries  which  were  essential  to  the 
safety  of  the  nation  and  the  steps  to  be  taken  to  main- 


224  AMERICA  IN  WORLD  MARKETS 

tain  or  establish  them ;  2,  the  measures  to  be  adopted  to 
recover  domestic  and  foreign  trade  lost  during  the  war 
and  to  obtain  new  markets;  3,  the  extent  and  the  means 
by  which  the  resources  of  the  Empire  might  be  de- 
veloped; 4,  the  extent  and  means  by  which  the  sources 
of  supply  within  the  Empire  could  be  prevented  from 
falling  under  foreign  control. 

The  Committee  in  its  report  draws  attention  to  the 
fact  that,  in  the  decade  immediately  before  the  war,  Brit- 
ish industry,  "in  the  long-established  manufactures,  with 
the  important  exception  of  the  steel  and  iron  trades,  had 
shown  great  vitality  and  power  of  extension,  but  that 
in  the  rise  and  expansion  of  the  more  modem  branches  of 
industrial  production  the  United  Kingdom  had  taken 
only  a  limited  share."  The  war,  however,  had  forced 
the  development  of  great  branches  of  industry  covering 
fields  in  which  the  United  Kingdom  had  been  more  or  less 
deficient,  and  this  was  recognised  as  an  important  gain 
for  the  future. 

With  regard  to  the  question  of  government  control, 
the  Committee  reported  that,  while  it  recognised  that  it 
would  be  necessary  to  continue  for  some  time  after  the 
war  some  portion  of  the  control  of  home  and  foreign 
trade  imposed  during  the  war,  in  order  particularly  to 
secure  to  the  country  adequate  supplies  of  foodstuffs  and 
raw  materials  for  industry  and  their  distribution,  it  rec- 
ommended that  the  restrictive  measures  should  be  kept 
within  the  narrowest  possible  limits  and  that  wherever 
practicable  the  trades  concerned  should  be  entrusted  with 
the  working  of  the  control  under  government  authority. 
The  committee  expressed  the  opinion  that  the  control  of, 
and  restrictions  upon,  industry  arising  out  of  war  con- 
ditions would  be  found  detrimental  under  normal  con- 


GREAT  BRITAIN  2S5 

ditions  and  should  be  removed  as  soon  as  possible  after 
the  conclusion  of  peace. 

It  intimated  also  that  any  attempt  to  make  the  British 
Empire  self-supporting  in  regard  to  all  the  raw  materials 
for  which  it  depends  on  foreign  countries  would  be 
neither  practicable  nor  economically  sound,  and  it  recom- 
mended that  a  selective  policy  be  adopted  which  should 
have  regard  to  the  relative  importance,  industrial  or  mili- 
tary, of  such  raw  materials  and  to  the  source  of  supply 
and  the  likelihood  of  their  disturbance  in  time  of  war. 

The  subject  of  the  essential  industries  was  treated  by 
the  Committee  in  a  special  advanced  report  which  covered 
"key"  or  "pivotal"  industries  concerned  with  the  follow- 
ing production:  synthetic  dyes,  spelter,  tungsten,  mag- 
netos, optical  and  chemical  glass,  hosiery,  needles,  tho- 
rium nitrate,  barytes,  limit  and  screw  gauges,  and  drugs. 
As  a  basis  for  recommendations  on  the  subject  they  ad- 
vanced the  general  principles  that  "a  particular  com- 
modity or  branch  of  production  which  is  of  great  national 
importance  at  a  given  time  may  not  continue  to  be  so," 
that  "the  causes  which  have  rendered  British  trade  de- 
pendent upon  the  present  enemy  countries  for  the  supply 
of  particular  commodities  are  by  no  means  uniform," 
and  that  therefore  special  and  separate  consideration 
should  in  the  future  be  given  to  the  study  of  the  essential 
industries  and  the  production  on  which  they  depend. 
For  this  purpose  they  recommended  the  establishment 
of  a  special  permanent  board  to  watch  the  course  of  in- 
dustrial development  and  to  work  out  from  time  to  time, 
when  necessary,  detailed  schemes  for  the  promotion  and 
assistance  of  industries  concerned  with  the  production  of 
the  special  commodities  indicated  in  the  report. 

With  regard  to  the  treatment  of  aliens  in  commercial 


226  AMERICA  IN  WORLD  MARKETS 

and  industrial  undertakings,  the  Committee  did  not  be- 
lieve that  it  would  be  necessary  or  practicable,  except  for 
a  limited  period  in  special  cases,  to  attempt  to  prevent 
enemy  subjects  from  establishing  agencies  or  holding  in- 
terests in  commercial  or  industrial  undertakings  generally 
in  Great  Britain. 

On  the  subject  of  the  establishment  of  trusts  and  com- 
binations the  Committee  held  that  the  increasing  inten- 
sity of  foreign  competition  and  the  revision  of  British 
industrial  and  commercial  methods  made  it  important 
that  the  individualistic  methods  hitherto  enforced  should 
be  replaced  by  co-operation  and  co-ordination  in  regard 
to  securing  supplies  of  materials,  in  regard  to  production 
and  in  regard  to  marketing  and  merchandising.  The 
Committee  believed  that  it  would  be  inexpedient  for  the 
Government  to  enter  on  any  policy  aiming  at  positive 
control  of  combinations  in  Great  Britain,  but  that  it 
would  be  desirable  to  have  some  government  department 
provided  with  information  in  regard  to  combinations, 
and  that  investigation  by  the  State  should  be  resorted  to 
in  special  cases.  The  Committee  was  of  the  opinion  that, 
where  necessary,  combinations  should  be  legalised  so  as 
to  be  enforceable  between  members. 

Dealing  with  financial  facilities  for  trade,  the  Com- 
mittee opposed  the  establishment  of  any  special  State  in- 
stitution for  the  purpose  of  financing  trade  and  industry, 
believing  that  under  normal  conditions  the  financial  needs 
of  British  industry  are  likely  to  be  attended  to  in  a 
more  satisfactory  way  by  private  banking  enterprise  than 
by  a  State  controlled  institution. 

The  Committee,  on  the  question  of  tariff  reform,  pro- 
posed as  a  basis  for  the  future  economic  policy  of  Great 
Britain  the  following  principles:   i.     Government  en- 


GREAT  BRITAIN  227 

couragement  for  industries  of  a  "pivotal"  character,  or 
for  those  of  military  importance  but  not  of  sufficient 
commercial  importance  to  be  developed  without  State 
assistance.  2.  Government  assistance  to  other  industries 
which  are  important  for  the  maintenance  of  the  indus- 
trial position  of  the  United  Kingdom  but  which  need  such 
assistance  on  account  of  undue  foreign  competition,  in- 
adequate supplies  of  raw  materials  or  any  other  cause. 
3.  A  serious  attempt  to  meet  the  wishes  of  the  Domin- 
ions and  colonies  for  the  re-adjustment  of  their  economic 
relations  with  the  United  Kingdom.  4.  An  effort  to  de- 
velop trade  between  the  British  Empire  and  the  Allies. 
5.  At  least  temporary  discrimination  against  Germany 
and  her  former  aUies  in  the  matter  of  trade  with  the 
British   Empire. 

In  conjunction  with  the  Ministry  of  Reconstruction, 
the  Local  Government  Board  has  undertaken  the  work 
of  constructing  100,000  houses  for  returned  soldiers,  of 
building  model  towns,  of  replanting  forests,  of  develop- 
ing transportation  and  electrical  supply  and  of  improving 
dwelling  conditions,  health  and  education. 

From  Great  Britain  came  the  proposal  for  an  Inter- 
national Labor  Commission,  with  representatives  of 
both  capital  and  labor  of  the  great  Powers,  to  handle 
labor  problems  internationally — such  as  right  to  or- 
ganise, hours  of  labor,  minimum  wages,  child  and  fe- 
male labor,  insurance  and  the  settlement  of  labor  dis- 
putes. 

British  labor  is  highly  organised — with  more  than 
4,000,000  members  in  the  Trade  Union  Congress  and 
nearly  i  ,000,000  in  the  General  Federation — and  it  is  re- 
suming its  important  political,  social  and  economic  in- 


228  AMERICA  IN  WORLD  MARKETS 

fluence  which  was  left  practically  in  desuetude  during  the 
war. 

In  consequence  of  increasingly  vigorous  agitation  on 
the  part  of  labor,  various  expedients  have  been  resorted 
to  by  the  British  Government  to  maintain  industrial 
peace.  The  so-called  Whiteley  Councils — industrial 
committees  of  employers  and  employes  in  individual 
businesses,  organised  in  accordance  with  the  recom- 
mendations of  the  Whiteley  Committee  in  the  House  of 
Commons  to  consider  and  settle  amicably  the  questions 
arising  in  the  particular  business — did  not  produce  any 
notable  results,  due,  it  has  been  stated,  to  the  fact  that 
existing  forms  of  factory  organisation,  including  the 
"shop  steward"  system,  militated  against  them.  What 
has  been  regarded  as  an  important  step  towards  the  har- 
monising of  the  interests  of  capital  and  labor  was  the 
convoking  by  Premier  Lloyd  George  of  the  British  "in- 
dustrial parliament."  Three  hundred  leading  employ- 
ers were  summoned  to  sit  in  session  with  500  labor  dele- 
gates, representing,  it  was  said,  about  10,000,000  Brit- 
ish workers.  The  Premier  directed  the  session  and  ar- 
rangements were  made  for  the  formation  of  commit- 
tees to  investigate  and  report  on  questions  that  have  in 
the  past  constituted  the  subject-matter  of  irreconcilable 
contentions.  High  hopes  are  founded  on  the  "industrial 
parliament"  in  view  of  the  fact  that  the  employers  and 
labor  delegates  composing  it  revealed  in  its  first  session 
a  markedly  conciliatory  attitude. 

In  behalf  of  the  British  Labor  Party,  which  consti- 
tutes the  political  representation  of  more  than  3,000,000 
union  workingmen,  Mr.  Sidney  Webb  and  other  party 
leaders  have  drawn  a  labor  platform.  Home  rule  and 
public  ownership  are  among  its  key-notes — nationalisa- 


GREAT  BRITAIN  229 

tion  of  lands,  railways,  mines,  electric-power  plants  and 
the  like,  government  ownership  and  control  of  public 
utilities,  and  home  rule  for  Ireland  and  for  the  other 
integral  parts  of  the  British  Empire.  It  advocates  free 
trade,  the  minimum  wage,  public  work  or  maintenance 
for  the  unemployed,  a  steeply-graded  income  tax  with 
an  initial  levy  on  capital  and  the  reconstitution  of  society 
on  a  socialistic  basis.  Its  hope  is  to  establish  in  England 
"a  healthy,  unified  and  contented  society." 

Labor  has  not  at  present  the  direct  power  in  the  Brit- 
ish Parliament  to  warrant  the  expectation  that  its  pro- 
gramme can  be  forced  into  adoption. 


CHAPTER  III 


FRANCE 


Reconstitution  of  Devastated  Territory  Is  Chief  Con- 
cern— Labor  Disturbed  by  Syndicalist  Doctrines — 
Project  of  National  Economic  Council — America  Re- 
garded as  "Guardian  Angel" — Expectation  of  Co-oper- 
ative Service — The  Principal  Needs  of  France — Gov- 
ernment Proposes  National  Federation  of  Employers. 

France,  in  her  urgent  need  of  attending  to  the  recon- 
stitution of  her  devastated  territories  and  of  her  ruined 
industries,  has  not  had  occasion  to  go  as  deeply  as  Eng- 
land has  done  into  detailed  plans  for  economic  recon- 
struction and  preparation  for  trade,  domestic  and  for- 
eign. Apart  from  rebuilding  in  the  ruined  sections,  her 
plans  generally  have  dealt  with  such  questions  as  the  in- 
stallation of  water-power  plants  and  the  development  of 
railway  and  waterway  transportation  and  colonial  de- 
velopments. 

The  French  State  itself  has  done  less  in  regard  to  the 
laying  of  detailed  plans  than  have  certain  private  organ- 
isations, such  as  the  Association  Nationale  D'Expansion 
Economique,  which  has  been  preparing  an  economic 
survey  of  the  country,  and  the  Comlte  Republicain  du 
Commerce,  de  I'lndustrie  et  de  I'Agriculture.  These 
bodies  have  been  formulating  the  views  of  commercial, 
industrial  and  agricultural  organisations  with  regard  to 
the  changes  in  the  economic  structure  of  the  country 

230 


FRANCE  231 

brought  about  by  the  war  and  preparations  for  the 
future.  Other  associations  are  preparing  for  the  pro- 
tection of  French  products  and  for  the  improvement  of 
riverway  transportation,  particularly  of  the  Rhone  River 
from  Geneva  to  Lyons,  while  the  Finance  Department  is 
considering  the  revision  of  customs  tariffs,  and  the  De- 
partment of  Commerce  has  a  staff  of  experts  working  on 
economic  problems. 

France  still  suffers  irt  her  whole  national  life  from  the 
terrible  wounds  of  the  war  and  has  reason  to  be  aggrieved 
at  the  knowledge  that,  in  comparison,  Germany  is  un- 
scathed and  relatively  prosperous.  The  French  feel 
that  their  claims  on  the  Allies  as  a  body  are  paramount 
and  that  aid  must  be  furnished  to  them  from  every  quar- 
ter where  it  is  available  for  the  purpose  of  restoring  to 
France  an  opportunity  to  start  off  again  on  independent 
national  life  so  that  the  heroic  Republic  may  not  incur  the 
danger  of  weakening  economically  and  going  down  into 
the  ranks  of  the  minor  nations.  French  economists 
have  long  felt  that  in  compensation  for  the  great  loss  of 
French  lives — more  men  of  France  were  offered  up  in 
the  bloody  sacrifice  than  of  Great  Britain,  Italy,  Belgium 
and  America  together — and  the  appalling  destruction  in- 
volved in  the  fact  that  France  was  made  the  principal 
battleground  of  the  war,  her  co-belligerents  who  escaped 
similar  disaster  and  who  owed  their  salvation  to  the  self- 
sacrificing  stand  which  France  had  taken,  will  consider 
a  practical  measure  of  pooHng  of  resources  of  every 
kind  and  will  recognise  the  right  of  France  to  a  prior 
claim  on  them. 

Labor  in  France  had  been  to  some  extent  affected 
before  the  war  by  the  revolutionary  doctrines  of  the 
"Internationale,"  which  was   fostered  by  the  German 


232         AMERICA  IN  WORLD  MARKETS 

Government  for  the  purpose  of  weakening  France.  The 
unpatriotic  demeanor  of  the  Syndicalistes  still  continues 
as  a  baneful  influence.  Labor  agitators,  advancing  quite 
commendable  doctrines  to  the  effect  that  workers  in 
the  future  should  not  agree  to  continue  the  form  of  life 
which  had  existed  before  the  war  and  have  a  right  to  par- 
ticipation in  the  direction  of  affairs  in  which  their  share 
is  an  essential  one,  have  been  expanding  these  doctrines 
into  more  or  less  subversive  principles. 

The  French  Government  is  planning  to  check  move- 
ments of  this  kind,  and  to  organise  labor  for  its  own 
benefit,  so  that  it  may  see  where  its  best  interests  lie  and 
may  aim  at  changes  which  are  of  benefit  to  the  workers 
without  being  of  evil  effect  for  the  whole  nation,  includ- 
ing the  workers.  The  "moderate"  workers  of  France 
have  formulated  a  programme  demanding  the  establish- 
ment of  a  minimum  wage  law  and  of  an  eight-hour  day, 
the  maintenance  of  wages  that  will  warrant  a  satisfac- 
tory standard  of  living,  legislation  to  prevent  labor  from 
being  treated  as  a  commodity  and  from  being  detri- 
mentally affected  by  the  influx  of  foreign  workers. 

The  French  General  Federation  of  Labor  has  peti- 
tioned the  Government  to  establish  a  National  Economic 
Council,  to  be  composed  of  manufacturers,  workers, 
farmers,  technical  advisers,  Government  representatives 
and  legal  and  economic  experts.  This  Council  would 
have  as  its  purposes  to  improve  the  economic  condition  of 
France  and  to  develop  and  co-ordinate  the  nation's  pro- 
ductivity. 

One  of  France's  most  serious  problems,  apart  from 
the  restoration  of  her  devastated  territory,  is  the  repres- 
sion of  undisciplined  agitation  under  the  guise  of  labor 
movements  and  the  settlement  of  labor  questions. 


FRANCE  233 

In  March,  1919,  the  French  Minister  of  Commerce  an- 
nounced that  he  was  instigating  the  organisation  of 
French  employers  into  a  national  federation.  Business 
men  in  France,  divided  into  twenty  groups,  had  been 
organised  only  in  a  multitude  of  small  associations. 
Some  5,000  of  these  had  a  membership  of  400,000. 
Through  lack  of  any  centralising  body  the  employers 
were  at  an  acknowledged  disadvantage  when  confronted 
with  organised  workers.  The  French  General  Federa- 
tion of  Labor  has  been  powerful  through  its  controlling 
leadership  with  a  machinery  for  exerting  political  in- 
fluence and  for  enforcing  its  demands.  Despite  the 
known  socialistic  tendencies  of  government  in  France  for 
years  past,  the  Clemenceau  administration  decided  that 
it  was  not  for  the  benefit  of  the  country  that  one  ele- 
ment of  industry  and  commerce  should  have  an  undue 
domination  and  that,  as  the  employers  had  failed  to  or- 
ganise of  their  own  initiative,  the  Government  would 
urge  them  to  do  so  and  direct  them  in  the  process. 

With  regard  to  reconstruction  generally,  France,  as 
has  been  said,  counts  on  foreign  assistance,  and  in  par- 
ticular on  that  of  the  United  States.  M.  Andre  Tardieu, 
French  High  Commissioner  to  the  United  States,  has 
stated  briefly  under  five  heads  the  forms  of  aid  which 
France  expects  from  this  country :  help  of  our  military 
organisation  in  clearing  territory  of  the  ruins  of  war; 
supply  of  materials;  machinery  for  industrial  plants; 
credit  to  cover  importations,  and  ships  to  be  chartered  to 
France  to  enable  her  to  restore  the  interrupted  commer- 
cial service  of  the  country. 

The  United  States  is  now  'Tange  gardien,"  the  guar- 
dian angel,  on  whom  France  has  come  to  rely.  The 
action  of  leading  American  business  organisations  in 


284         AMERICA  IN  WORLD  MARKETS 

extending  the  hand  of  friendship  to  France  has  called 
the  French  chambers  of  commerce  to  new  life  and  activ- 
ity, and  has  smoothed  the  way  for  the  creating  of  com- 
mercial and  industrial  associations  in  France  to  aid  in 
planning  and  carrying  out  the  campaign  of  construc- 
tion. The  American  Industrial  Commission  to  France 
of  1916  outlined  the  principles  on  which  American  co- 
operation could  be  based  and  the  French  governing 
authorities  expressed  hearty  approval  of  them  and  have 
been  counting  on  their  establishment  and  on  the  action 
and  benefits  to  accrue  from  them. 

"We  have  come,"  said  Mr.  W.  W.  Nichols,  Chairman 
of  the  Commission,  addressing  the  French  Reception 
Committee  when  the  Commission  landed  at  Bordeaux, 
"as  a  group  of  American  business  men  with  a  vision — 
to  do  what  we  can  to  promote  commercial  reciprocity. 
How  can  we  serve  France?  If  we  know  that,  then  we  are 
in  a  position  to  help  mutually.  We  are  here  to  offer 
our  services.  Tell  us  your  needs  and  we  shall  exert  our 
best  influence  in  filling  them.  We  have  no  other  aim. 
We  are  not  looking  for  mere  selfish  commercial  expan- 
sion. We  seek  primarily  the  opportunity  to  be  of  as- 
sistance and  then  desire  to  study  with  you  the  way  in 
which  America  can  further  aid  and  promote  commercial 
development  with  France. 

"The  exigencies  of  war,"  he  continued  in  substance, 
"at  present  leave  the  trade  balance  against  France  with 
a  vengeance,  and  this  harms  our  Franco-American  rela- 
tionship. We  want  to  help  in  righting  this  unequal  con- 
dition of  affairs  as  soon  as  possible. 

"This  is  the  policy  we  propose  to  recommend  to  our 
people.  We  believe  the  hour  has  come  when  those  inter- 
ested in  international  commerce  must  acquire  a  new  and 


FRANCE  235 

more  exalted  notion  of  the  obligations  which  their  re- 
lations with  foreign  countries  impose.  We  feel  that  the 
merchant  and  manufacturer-exporter  should  become  pen- 
etrated with  the  feeling  that  their  first  aim  should  be, 
not  the  acquisition  of  gain,  but  commercial  service  car- 
ried out  in  such  fashion  that  it  will  be  of  the  greatest 
benefit  to  the  customer  nation  they  serve  as  well  as  to 
their  own  nation,  and  consequently  to  themselves.  Far 
from  wishing  to  profit  by  the  difficulties  in  which  France 
now  finds  herself,  we  are  anxious  to  serve  France  and  so 
to  conduct  our  business  relations  with  France  that  the  re- 
sult will  be  mutually  and  reciprocally  beneficial  to 
France  and  to  the  United  States.  Our  ideas  in  this  re- 
gard may  be  more  specifically  expressed  by  stating  that 
America,  on  account  of  her  special  natural  resources,  is 
in  a  position  to  produce  and  to  furnish  certain  articles 
and  commodities,  while  France  on  her  side,  on  account 
of  her  artistic  nature,  long  in  the  making,  and  the  high 
intelligence  and  business  equipment  of  her  people,  is 
peculiarly  qualified  to  produce  and  furnish  products  of 
a  different  kind. 

"It  must  be  our  aim  to  supply  to  France  our  special 
products  and  to  accept  from  her  in  return  her  distinctive 
products  and,  desirably,  as  nearly  as  possible  of  equal 
value.  We  should  not  seek  to  interfere  with  industry 
peculiar  to  France,  and  France  should  not  plan  a  fierce 
competition  with  us  in  regard  to  products  which  are  in 
a  peculiar  way  our  own.  The  feeling  inspired  by  such 
a  rivalry  will  frustrate  the  promotion  of  better  things. 
The  only  information,  therefore,  which  we  seek  is  how 
we  can  render  service  to  France  for  the  reconstruction 
of  her  devastated  territory,  for  the  supplying  of  her  in- 
dustrial needs  and  for  the  creation  of  new  enterprises 


S36         AMERICA  IN  WORLD  MARKETS 

which  will  further  the  economic  well-being  of  the  Re- 
public." 

The  French  welcomed  this  announcement,  which  took 
due  account  of  the  pride  and  amour  propre  of  a  great 
nation,  since  it  was  a  plan  for  mutual  aid,  and  they  pro- 
ceeded to  organise  commissions  and  to  formulate  ar- 
rangements for  national  development  when  the  day  of 
peace  should  come.  They  rejoiced  at  the  prospect  of  an 
entirely  new  spirit  being  inspired  into  the  old  methods  of 
commerce.  They  knew  that  commercial  greed  was  the 
root  of  the  evil  which  precipitated  the  war  of  world-wide 
devastation,  that  America  was,  after  all,  in  the  war  with 
the  expressed  purpose  of  changing  for  all  time  the  con- 
ditions which  led  to  the  war,  of  supplanting  might  by 
right,  of  replacing  rapine  and  terrorism  by  fair  and  hon- 
est principles  of  international  relations,  and  that  to  attain 
this  end  it  would  be  essential  to  wipe  out  old  iniquitous 
principles  of  commerce  and  to  put  fair  dealing  in  the 
place  of  selfish  highhandedness. 

Foreign  trade,  the  French  had  always  insisted,  im- 
plies exchange,  not  exchange  of  products  for  money  only, 
the  mere  medium  of  exchange,  but  of  products  for  prod- 
ucts, natural,  industrial  or  their  equivalent  in  services, 
that  they  who  sell  should  also  buy,  and  they  always  re- 
sented an  unfair  attitude  in  this  regard  by  others.  Thus 
it  had  unfortunately  happened  that  owing  to  the  special 
character  of  the  laws  and  prescriptions  which  regulated 
the  tariffs  imposed  by  the  United  States,  and  owing  to 
unscrupulous  practices  by  traders  operating  from 
America,  the  French  had  considered  that  they  were  not 
equitably  treated,  and  they  denied  to  the  United  States 
the  privilege  of  the  most  favored  nation  in  the  matter  of 
imports.    Indeed,  America  alone  of  all  the  great  nations 


FRANCE  237 

had  found  an  extra  tariff  barrier  raised  against  her  ex- 
ports to  France,  the  duties  on  some  American  wares 
being  double  what  they  were  on  similar  goods  imported 
into  France  from  other  countries.  This  is  concrete  and 
practical  evidence  of  the  need  of  embarking  on  new  lines 
of  international  business  policy. 

France  has  been  getting  ready;  the  big  work  is  still 
ahead. 

The  needs  of  France,  which  can  be  filled  only  from  the 
United  States,  are  on  such  a  vast  scale  as  to  make  heavy 
demands  upon  the  industrial  and  manufacturing  possi- 
bilities of  this  country  for  several  years.  Thousands  of 
towns  and  villages  have  been  destroyed  and  a  rich  and 
prosperous  territory  made  worse  than  a  wilderness.  Not 
merely  raw  material — lumber,  brick,  steel  and  iron, 
cement  and  the  like — will  be  needed  from  the  United 
States,  but  also  much  that  enters  into  the  reconstruction 
of  buildings  and  the  equipment  of  centres  of  population. 
In  the  war  zone  more  than  a  score  of  different  kinds  of 
textile  industries,  as  well  as  agricultural,  mining,  metal- 
lurgical, mechanical  and  electrical  industries,  had  before 
the  war  engaged  the  activities  of  some  2,000,000  workers 
and  had  produced  products  of  an  annual  value  exceed- 
ing two  billion  dollars.  From  America  must  go  the 
bulk  of  the  raw  materials  and  the  finished  machinery  and 
manufactured  articles  that  will  be  needed  if  these  in- 
dustries are  to  be  replaced. 

The  French  Minister  of  Industrial  Reconstruction  has 
stated  that  the  restoration  of  the  coal  and  industrial  dis- 
tricts of  the  Departments  of  Nord  and  Pas  de  Calais  will 
cost  at  least  $15,000,000,000. 

Throughout  the  rest  of  France  the  need  for  the  sup- 
plies which  only  America  can  furnish  is  hardly  less  than 


238         AMERICA  IN  WORLD  MARKETS 

in  the  war  zone.  Plans  have  already  been  made  for  the 
installation  of  hydro-electric  plants  of  approximately 
750,000  horse-power,  and  a  further  installation  of  3,000,- 
000  horse-power  is  intended.  The  mechanical  industries 
to  which  this  power  will  be  applied  will  make  demands 
on  the  United  States  for  many  kinds  of  machinery  in 
great  quantity. 

France  is  confronted  with  a  serious  shortage  of  man- 
ual labor.  Her  industries  to-day  are  short  of  millions 
of  men,  and  it  will  be  impossible  for  her  to  continue  to 
depend  upon  female  labor  as  a  substitute.  Female  labor 
has  been  saving  the  nation,  but  it  can  be  only  a  temporary 
expedient,  restricting  the  progress  of  France  in  other 
ways  while  it  lasts.  So  impressed  was  the  French  Gov- 
ernment with  the  gravity  of  this  situation  that  at  the  out- 
set it  constituted  the  principal  reason  for  the  invitation 
extended  by  the  Government  to  the  American  Industrial 
Commission  to  visit  France,  the  need  for  labor-saving 
machinery  and  devices  being  imperatively  urgent.  Serv- 
ices in  practically  every  domain  of  modern  human  effort 
will  be  needed  by  France  from  the  United  States.  In- 
deed there  will  be  similar  need  on  the  part  of  Belgium, 
Italy,  Serbia,  Roumania,  and  to  a  minor  extent  by  other 
countries. 

Taking  the  only  proper  view  of  Europe's  expectations 
from  America  and  regarding  the  situation  not  as  oppor- 
tunity for  commercial  gain  but  as  humanity-service,  one 
is  almost  appalled  at  the  weight  of  the  burden  which  is 
about  to  be  thrown  on  all  the  industrial,  commercial  and 
service  resources  of  the  productive  brains  and  of  the 
skilled  labor  of  the  United  States. 

It  is  with  regard  to  France  that  the  first  steps  must 
be  taken  and  the  course  followed  in  her  case  will  almost 


FRANCE  239 

certainly  be  the  course  to  be  pursued  with  regard  to  the 
other  countries. 

The  practical  upshot  of  the  discussions  between  the 
American  Industrial  Commission  and  the  French  was 
this :  Commissions  representing  the  various  groups  of  in- 
dustries interested  in  the  work  of  reconstruction  and  in- 
dustrial upbuilding  in  France  should  go  to  that  country 
to  investigate  conditions  in  detail  on  the  ground,  and  to 
negotiate  with  the  French  regarding  the  services  to  be 
rendered;  commissions  of  French  business  men  should 
come  to  America  for  a  like  purpose.  The  French  Gov- 
ernment agreed  to  lend  its  most  energetic  co-operation 
to  the  work. 


CHAPTER  IV 


ITALY 


Restriction  of  Emigration — Intended  that  Italian  Work- 
ers Going  Abroad  Shall  be  Skilled — Industrial  Devel- 
opment in  Italy — Declaration  of  Rights  by  Business 
Men — Industrial  Association  Issues  Proclamation — 
Capital  Will  No  Longer  Tolerate  Unequal  Conditions 
— Italy  an  Inviting  Foreign  Market — Danger  of  Ger- 
man Penetration  Again  Threatens. 

Italy  is  among  the  countries  which,  before  the  war 
ended,  had  been  making  elaborate  plans  for  the  after- 
war  period.  A  Government  Commission,  divided  into 
seven  committees  and  presided  over  at  its  main  session 
by  the  Italian  Premier,  Signor  Orlando,  had  worked  out 
important  plans  with  regard  to  the  following  subjects: 
labor ;  public  works ;  the  organising  of  credits ;  technical, 
mechanical  and  artistic  education  of  the  people;  the  de- 
velopment of  communications  and  transportation;  social, 
political  and  economic  reforms. 

It  is  interesting  to  note  that  the  committee  which 
had  to  do  with  labor  rendered  a  decision,  which  later 
received  general  endorsement,  that  henceforth  Italian 
emigration  must  be  restricted.  Italian  workers,  accord- 
ing to  the  plans  advocated,  must  hereafter  obtain  permits 
to  go  abroad.  The  committee  stated  that  all  Italians 
were  well  aware  of  the  fact  that  the  prestige  of  the  king- 
dom had  not  by  any  means  been  enhanced  by  the  class  of 

240 


ITALY  24fl 

Italian  labor  which  went  to  foreign  countries;  that,  as  a 
matter  of  fact,  the  country  was  often  judged  from  the 
poorest  of  its  citizens  who  in  foreign  countries  labored 
at  the  humblest  kind  of  unskilled  work  or  earned  a  liv- 
ing with  street  organs.  Hereafter,  it  is  proposed,  the 
Italians  who  go  abroad  shall  not  be  destined  for  sewer 
digging  and  road  grading. 

Before  he  can  receive  a  permit  to  emigrate,  the  Ital- 
ian, if  the  plan  is  carried  out,  will  have  to  qualify  as 
a  skilled  worker.  For  this  purpose  institutions  are  to  be 
founded  in  Italy  where  the  men  shall  receive  technical 
and  mechanical  training.  A  central  organisation  under 
the  direction  of  the  Government  will  handle  the  entire 
question  of  emigration  and  it  will  have  bureaus  estab- 
lished throughout  the  kingdom  where  all  details  will  be 
available  for  the  emigrant  regarding  foreign  countries, 
rates  of  labor  and  social  conditions,  and  where  from 
time  to  time  workmen  may  receive  permits  to  go  abroad. 

Before  the  war  the  number  of  Italian  subjects  in  for- 
eign countries,  as  estimated  from  the  Italian  Emigration 
Division's  statistics,  was  approximately  7,000,000,  in- 
cluding women  and  children.  Forty-eight  per  cent  were 
in  South  America,  thirty-two  per  cent  in  North  America, 
sixteen  per  cent  in  Europe,  three  and  a  half  per  cent  in 
North  Africa.  The  adult  males  under  55  years  of  age 
were  placed  at  slightly  over  1,000,000.  About  one-half 
of  these  returned  for  the  war,  leaving  some  500,000  able- 
bodied  Italians  abroad,  of  whom  about  370,000  are 
laborers.  The  war  not  only  stopped  the  outflow  of  Ital- 
ian laborers ;  it  also  rectified  to  a  considerable  extent  the 
Italian  economic  balance  by  bringing  home  one-half  of 
the  valid  workers. 

The  same  committee,  dealing  with  labor,  has  further 


242  AMERICA  IN  WORLD  MARKETS 

proposed  the  introduction  of  reforms  which  are  intended 
to  make  working  conditions  in  Italy  far  more  attractive 
than  they  have  been  in  the  past,  the  workers  to  have 
faciHties  for  training  not  merely  in  the  trades,  but  also 
in  artistry,  so  that  their  work  may  be  of  a  superior  kind. 
Plans  are  also  made  for  State  insurance  and  protection 
of  the  workingmen's  families  on  the  general  principle 
that  the  State  must  continue  to  do  for  the  citizen  and 
his  dependents  what  it  showed  it  could  do  for  the  soldier 
and  his  dependents  during  the  war. 

The  war  brought  to  Italy  a  very  notable  industrial 
development,  and  an  important  industrial  organisation 
has  resulted  from  it  which  is  expected  to  be  of  great 
benefit  in  establishing  Italy  as  a  centre  of  production 
in  the  future.  The  mining  and  mineral  industries,  pro- 
ducing iron,  copper,  antimony  and  mercury,  were  de- 
veloped in  a  notable  way  to  satisfy  military  needs.  There 
was  also  an  extensive  growth  in  the  metallurgical  in- 
dustry, in  spite  of  the  enormous  increase  in  the  price  of 
coal  and  the  difficulty  of  getting  steel  and  iron  from 
abroad.  Manufacture  of  war  material,  guns,  projectiles, 
naval  equipment,  took  on  a  feverish  activity  during  the 
war.  The  production  of  automobiles  in  a  great  variety 
of  types  was  also  a  notable  development.  The  textile 
industries,  cotton,  wool  and  silk,  went  ahead  progres- 
sively, as  did  also  that  of  tanning  and  shoemaking. 
Chemical  industries,  particularly  for  production  of  ex- 
plosives, saw  a  very  notable  development,  and  many 
new  forms  of  chemical  products  were  made  in  Italy,  and 
it  is  expected  will  continue  to  constitute  industries  for 
that  country. 

The  Government  operated  more  than  a  thousand  main 
and  auxiliary  factories  with  some  half  million  working- 


ITALY  243 

men  and  more  than  100,000  women.  These  factories 
produced  artillery,  aeroplanes,  automobiles,  bombs,  cart- 
ridges. More  than  400  factories  produced  explosives, 
chemical  products  and  mining  and  extractive  industrial 
products.  Besides  these,  1,500  factories  were  devoted 
almost  in  their  entirety  to  the  production  of  projectiles. 
Italy's  industrial  motto  at  this  time  was  "Produce  much, 
produce  well,  produce  cheaply." 

Italy  is  all  ready  for  work  in  the  new  period  and  is 
anxious  to  grow  to  be  the  great  power  which  her  present 
position  by  the  side  of  the  United  States,  England  and 
France  warrants  her  in  feeling  confident  she  is  entitled 
to  be.  She  seeks  colonial  expansion  so  that  her  workers, 
if  they  do  emigrate,  may  be  able  to  go  where  they  will 
still  be  Italian  citizens.  In  a  confiding,  even  touching, 
way  she  appeals  to  the  United  States  for  the  help  on 
which  she  has  been  counting  from  this  country. 

America  has  raw  materials  and  has  the  financial 
strength  to  help  Italy  and  Italy  has  been  petitioning  this 
Government  to  send  to  her  a  commercial  attache  as  well 
as  American  trade  commissioners  to  study  with  her  the 
commercial  needs  of  her  people,  to  plan  the  assistance 
which  the  United  States  should  render  to  her  and  to 
outline  a  system  of  foreign  trade  relations  which  would 
be  of  benefit  to  both  countries.  She  has  the  labor  and 
skill  and  the  energy  to  become  great  commercially  if  she 
will  but  be  provided  with  the  materials  and  with  the 
financial  aid  which  the  United  States  can  provide. 

Italian  manufacturers  and  merchants  are  making  a 
vigorous  bid  for  better  treatment  not  only  at  home,  but 
also  in  foreign  markets.  Tired,  as  they  declare  them- 
selves to  be,  of  misrepresentation  of  their  products  and 
of  the  credit  barriers  which  have  been  raised  against 


244         AMERICA  IN  WORLD  MARKETS 

them,  they  decided  on  organisation  and  have  taken  the 
bull  by  the  horns  and  have  demanded  that  their  Govern- 
ment join  them  in  insisting  on  the  rights  which  belong 
to  them  in  the  world's  commerce. 

Many  Italian  manufacturers  found  themselves  entan- 
gled in  German  commercial  banks,  often  without  know- 
ing beforehand  that  the  bank  had  any  foreign  connection 
whatever.  It  was  a  shock  to  the  entire  Italian  nation 
when,  after  it  entered  the  war,  it  learned  that  the  best- 
known  commercial  bank  in  the  country  was,  as  far  as 
control  was  concerned,  practically  a  German  institution. 
Some  of  the  smaller  private  banks  were  openly  German, 
but  most  of  them  had  Italian,  French  or  English  names. 

American  tourists  will  recall  their  surprise  at  the  cour- 
tesy of  the  German  or  Swiss  hotelkeepers  in  the  prin- 
cipal cities  and  resorts  of  Italy  who  recommended  them 
to  nicely  kept  little  banks,  usually  one  or  two  flights  up 
in  the  building  in  which  they  were  located,  where  they 
were  amiably  received  by  clerks  who  spoke  English  with 
a  quaint  cockney  accent,  and  where  they  obtained  better 
rates  of  exchange  than  the  Italian  money-changers  of- 
fered. The  tourist  indeed  will  recall  that  during  his  stay 
in  Italy  he  had  remarkably  little  direct  intercourse  with 
Italians,  not  only  his  hotelkeeper  and  waiters  and  cham- 
bermaids being  foreigners  who  spoke  more  or  less  Eng- 
lish, but  also  the  guides  who  took  him  to  the  churches 
and  the  museums,  the  directors  of  the  special  music  halls 
to  which  he  was  taken  and  in  which  German  and  English 
acrobats  and  singers  appeared,  and  even  the  managers 
of  the  slumming  places,  if  he  were  weak  enough  to  al- 
low himself  to  be  led  to  such  places,  and  the  souvenirs 
and  photographs  which  he  purchased,  if  they  were  not 
actually  labelled  "made  in  Germany,"  were  sold  to  him 


ITALY  245 

by  non-Italians.  Indeed,  usually  he  left  the  wonderful 
land  of  Italy  without  a  high  appreciation  of  the  Italian 
people.  Some  one  always  took  occasion  to  quote  to  him  : 
"Here  man  alone  is  vile." 

But  now  Italy  will  no  longer  stand  for  misrepresenta- 
tion. The  merchants  and  manufacturers  of  Italy  have 
started  a  campaign  in  behalf  of  their  country  and  they 
hope  to  make  the  whole  world  give  due  recognition  to  it. 

Italy  wants  help  from  abroad.  From  America,  as 
has  been  said,  she  desires  raw  materials  for  her  industries 
and  machinery  for  factories  to  render  her  independent 
of  German  or  other  domination  in  the  future,  and  expert 
labor  to  start  these  factories  and  credit  arrangements  in 
consonance  with  her  standing  as  one  of  the  four  leading 
powers  of  the  hour.  In  obtaining  these  and  the  manu- 
factured products  for  which  she  furnishes  a  market,  she 
wishes  to  be  freed  forever  from  the  hampering  condi- 
tions which  in  the  past  governed  her  trade  with  certain 
countries.  The  merchants  and  manufacturers  expect 
that  the  Italian  Government  will  formally  back  them  in 
this  effort.  They  demand  new  and  better  conditions  in 
importing  products  from  the  United  States  and  other 
countries,  and  they  demand  fair  treatment  in  placing 
their  own  products  on  foreign  markets. 

This  decision  was  reached  in  a  congress  of  Italian 
manufacturers  and  business  men,  held  under  the  auspices 
of  the  Association  of  Italian  Incorporated  Companies, 
but  open  to  all  Italian  employers  in  good  standing.  The 
gathering  regarded  itself  as  the  authorised  representa- 
tive of  capital  in  Italy,  and  it  dealt,  not  merely  with 
the  commercial,  industrial  and  economic  needs  of  the 
Italian  kingdom  and  the  question  of  foreign  markets 
and  business  relations,  but  also  of  the  relations  of  capital 


846         AMERICA  IN  WORLD  MARKETS 

and  labor  and  of  capital  with  the  Government.  It 
intends  to  see  to  it  that  capital,  at  least  in  Italy,  will  get 
better  times,  that  it  will  no  longer  be  the  sport  of  poli- 
ticians and  that  it  will  not  tolerate  from  the  Government 
such  treatment  as  it  has  submitted  to  in  the  past.  It 
has  mapped  out  a  new  direction  which  it  has  formally 
agreed  to  pursue,  and  the  Association  which  represents 
it  is  the  most  powerful  body  in  the  economic  life  of 
Italy. 

A  proclamation  which  it  has  issued  is  such  a  striking 
document — a  veritable  Declaration  of  Rights  of  industry 
— and  covers  in  such  a  comprehensive  way  the  main  fea- 
tures of  Italy's  industrial  and  commercial  life,  that  it 
will  well  repay  consideration.  It  furnishes  an  opportu- 
nity to  examine  in  some  detail  the  sentiments,  aspirations 
and  plans  for  action  of  business  as  an  organisation  in 
one  of  the  great  nations. 

With  the  upheaval  brought  by  the  war,  the  proclama- 
tion says,  old  theories,  old  methods,  old  dogmas,  old 
ideas  are  going  by  the  board.  This  applies  to  the 
political  and  social  domains,  but  far  more  so  to  the 
economic  domain.  The  vital  interests  of  the  producing 
classes  in  Italy  must  be  recognised  to  be  the  vital  in- 
terests of  the  nation,  and  they  must  be  protected  against 
the  foreigner  with  one-sided  aims.  The  German  domi- 
nation kept  out  of  Italy  to  a  great  extent  the  American, 
French  and  British  traders.  Italy  must  be  opened  wide 
to  all  of  them  and  must  also  assert  her  right  to  enter 
their  markets. 

The  war  has  ended  the  old  prejudice  which  had  been 
fostered  in  Italy  against  capital.  "For  all  too  long,"  the 
proclamation  says,  "with  the  psychology  of  a  poor  nation, 
both  official  Italy  and  popular  Italy  held  capital  in  sus- 


ITALY  247 

picion  and  Kept  it  constantly  in  a  defensive  and  apologetic 
attitude.  The  Government  did  not  dare  defend  it,  and 
the  demagogue  had  a  free  hand  in  arousing  the  jealous 
passions  of  the  poor  against  the  rich,  of  the  unfortunate 
against  the  producers  of  wealth."  The  war  has  shown 
what  the  affiliations  of  many  of  Italy's  blatant  dema- 
gogues were,  and  how  attacks  on  capital  and  on  Italian 
industries  were  a  part  of  the  German  intrigue  in  gaining 
economic  control  in  Italy. 

While  for  years  in  the  Italian  parliament  and  on  Ital- 
ian platforms,  the  Association  affirms,  one  form  or  other 
of  the  sources  of  national  wealth  production  was  under 
attack  by  the  demagogues,  "the  nation's  best  interests 
were  neglected  and  the  foreigner  profited  of  the  chance 
to  dump  his  products  on  our  market  and  to  conduct  an 
underhand  campaign  to  discredit  Italian  products  in  Italy 
and  abroad.  But  for  the  war  this  condition  would  prob- 
ably have  continued  till  the  German  invasion  of  Italy's 
economic  life  had  suffocated  all  the  initiative  and  re- 
sources  of   the   country's   productive   capacity." 

The  foreigner's  work  it  is  admitted  was  aided  by  errors 
at  home.  Capital  in  Italy,  seeing  itself  the  object  of  so 
much  prejudice  and  attack,  remained  within  its  shell. 
It  kept  out  of  the  political  field;  it  did  not  mingle  with 
the  other  classes;  it  did  not  defend  itself;  it  did  not  offer 
its  co-operation  to  the  Government.  But  now  capital 
knows  its  great  power  and  it  is  going  to  use  it.  It  knows 
that  the  producers  are  strong  if  they  work  together,  and 
the  populace  now  knows  that  the  condition  of  the  work- 
ing people  can  improve  only  when  production  improves 
and  is  prosperous.  The  time  has  come  to  fix  enduringly 
the  happy  conditions  which  the  war  brought  about.  Capi- 
tal, <^hat  is  the  wealth  producers  of  the  nation,  are  deter- 


248  AMERICA  IN  WORLD  MARKETS 

mined  to  take  active  part  in  public  life  so  that  they  can 
defend  their  own  interests  without  leaving  their  defence 
to  others. 

There  is  to  be  a  new  way  of  merchandising  in  Italy, 
not  only  on  the  part  of  the  manufacturers  and  merchants 
in  dealing  with  the  home  and  foreign  markets,  but  also 
on  the  part  of  the  Italian  shopkeeping  trade.  It  is  by 
the  establishment  of  fixed  prices. 

The  old  wearisome  method  of  bargaining  over  every 
sale  and  purchase  between  manufacturer's  salesman  and 
retailer  and  between  retailer  and  consumer,  with  the 
waste  of  time  and  the  stirring  of  bad  blood  that  haggling 
over  the  price  of  everything  bought  entails,  with  the  seller 
usually  dissatisfied  at  the  profit  he  has  received  and  the 
buyer  suspicious  that  even  with  all  his  expert  trading  he 
has  paid  too  much  for  the  article,  must  be  done  away 
with.  The  foreigners'  stores  in  Italy,  which  traded  by 
fixed-price  methods,  had  been  reaping  the  profit  of  the 
ill-advised,  old-time  Italian  method,  but  the  people  per- 
sisted, when  dealing  in  Italian  stores,  in  keeping  up  the 
system  of  bargaining.  A  well-organised  campaign,  with 
an  appeal  to  the  patriotic  instincts  of  the  people,  has  been 
planned  to  enable  the  retailers  to  end  for  all  time  the  ut- 
terly unsatisfactory  method  which  from  time  immemorial 
has  been  in  vogue  throughout  the  kingdom. 

Hereafter,  Italy's  business  men  are  resolved,  publicity 
will  be  invoked,  and  all  efforts  that  capital  may  make  for 
its  own  benefit  and  that  of  the  nation  will  be  made  openly 
with  direct  appeal  to  public  opinion,  and  not  clandestinely 
or  with  mere  appeals  to  the  governing  powers.  When 
the  campaign  is  publicly  conducted  it  will  be  easier  to 
show  that  there  is  no  antagonism  between  producer  and 
consumer  and  that  the  whole  nation  is  interested  in  the 


ITALY  249 

same  problems.  When  the  pubUc  is  convinced  of  this 
truth  it  will  prevent  the  repetition  of  the  blunders  of  yes- 
terday, when  parliament,  government  and  public  admin- 
istration gave  no  attention  to  the  exploitation  of  the 
nation's  sources  of  wealth,  nor  to  the  development  of 
agriculture  on  modern  methods;  failed  to  encourage  the 
maritime  and  the  mining  industries ;  took  no  steps  for  the 
adequate  defence  of  the  economic  independence  of  the 
nation.  Native  enterprise  got  small  encouragement. 
Italy  was  wide  open  for  German  exploitation. 

"There  is  not  only  no  antagonism  between  our  class 
and  the  working  class,"  the  proclamation  says,  "but  every 
gain  by  our  class  benefits  every  other  class  in  the  coun- 
try, so  that  when  production  is  large,  profitable  wages 
are  paid  and  money  circulates  freely,  whereas  when  pro- 
duction is  poor  and  unable  to  struggle  against  foreign 
competition,  the  working  classes  are  the  first  to  suffer 
and  the  whole  nation  feels  the  depression." 

In  the  new  order  of  things  capital  must  have  a  new 
relation  to  labor.  Capital  in  Italy  is  in  different  condi- 
tion from  what  it  is  in  many  other  countries.  In  Italy 
there  are  no  great  concentrations  of  inactive  wealth  of 
a  feudal  type.  There  is  practically  no  income  without 
work.  Italy's  business  men  are  hard  workers.  Capital 
in  Italy  considers  itself  as  constituting  one  of  the  work- 
ing classes,  and  on  account  of  its  position  it  now  under- 
takes to  be  the  first  to  put  the  lessons  of  the  new  times 
into  force.  Capital  has  the  duty  and  it  is  to  its  interest 
also  to  insist  on  the  betterment  of  living  conditions  for 
labor,  on  its  technical  improvement  and  moral  and 
intellectual  elevation.  Capital,  therefore,  proposes  bet- 
ter schools;  it  proposes  insurance  against  accidents  and 
pensions.     Gradually   the   distance,   moral,    mental   and 


250  AMERICA  IN  WORLD  MARKETS 

economic,  between  capital  and  labor  must  be  lessened. 

"Our  class  is  not  an  oligarchy  or  a  closed  house;  it 
is  open  to  all,  the  only  requirements  being  culture  and 
work."  Being  a  working  class  itself,  capital  in  Italy  now 
desires  "tranquil  and  fruitful  relations  with  the  other 
working  classes."  To  this  end  it  demands  that  the  law 
make  labor  contracts  more  rigid  and  binding,  and  that 
it  determine  specifically  the  rights  and  obligations  of 
both  parties  under  such  contracts.  In  this  way  only  can 
strikes  and  lockouts  be  made  an  impossibility  in  the 
future. 

The  relations  of  industry  and  agriculture  in  Italy  have 
long  been  misrepresented  and  misunderstood.  There 
is  really  no  antagonism  between  them.  They  should  unite 
in  working  for  the  economic  independence  of  the  nation. 
"Their  motto,"  the  proclamation  says,  "should  be:  'Let 
Italy  suffice  for  herself;  let  her  be  removed  from  depen- 
dence on  the  foreigner;  let  her  be  put  in  a  position  to 
compete  with  the  other  nations  in  the  international  mar- 
kets.' "  Agriculture,  therefore,  must  be  fostered.  Mod- 
ern machinery  and  implements  must  be  obtained  for  it 
and  modern  methods  applied.  Transportation  facilities 
must  be  provided  as  well  as  suitable  markets,  and  ar- 
rangements made  for  financing  the  farmer  and  his  crops. 
When  this  is  done  the  Italian  farmhand  will  not  so  easily 
be  induced  to  emigrate. 

The  State  must  collaborate  with  Italian  capitalists  to 
intensify  manufacturing  and  industrial  production  and 
to  make  the  country  free  from  the  German  or  any  other 
yoke,  and  to  obtain  for  Italy  the  position  in  foreign  mar- 
kets which  rightly  belongs  to  her.  The  State  must 
cast  aside  the  old  fallacies.  State  and  municipal  owner- 
,ship  of  industries  is  one  of  these  fallacies  that  must  be 


ITALY  251 

abandoned.  "Such  control,  except  of  certain  necessary 
services  of  public  order,  is  neither  profitable  nor  beneficial 
to  industry  nor  to  the  nation."  Pariiament  should  also 
carefully  avoid  interfering  with  the  quiet  and  orderly 
progress  of  industry.  It  should  aid  production  in  every 
way  and  not  handicap  it  with  ill-considered  legislation. 

New  principles  of  taxation  are  demanded.  This  de- 
mand will  interest  American  merchants  and  manufac- 
turers who  have  desired  to  establish  business  branches 
in  Italy  and  who  have  been  bewildered  by  the  Italian 
laws  on  taxation.  It  may  be  said  here,  incidentally, 
that  there  are  two  kinds  of  taxes  on  the  corporation  doing 
business,  one  on  the  **Ricchezza  mobile,"  and  the  other 
on  the  "Ricchezza  immobile,"  and  no  two  persons  in 
Italy  seem  to  be  in  accord  on  what  is  specifically  implied 
in  these  terms,  which  may  be  translated  "fluid  resources," 
capital,  turnover,  profits  and  the  like,  and  "fixed  re- 
sources," property  of  all  kinds  other  than  the  fluid  re- 
sources. In  the  same  Italian  city  one  American  corpo- 
ration will  find  itself  called  upon  to  pay  taxes  on  the 
basis  of  its  whole  capitalisation  and  operations  in  the 
United  States,  while  another  is  merely  asked  for  con- 
tribution on  the  basis  of  its  business  in  Italy,  and  still 
a  third  gets  off  on  the  mere  consideration  of  profit  on  its 
local  transactions.  Certain  lawyers  who  are  specialists 
in  this  matter  can  arrange  for  entirely  reasonable  terms 
for  their  clients. 

The  trouble  is  that  in  Italy  there  are  five  diflferent 
supreme  courts.  The  rulings  of  any  one  of  these  may  be 
good  law  for  the  whole  country,  but  where  all  have  ruled 
on  the  same  subject  and  have  ruled  diversely,  there  is 
confusion,  and  the  foreign  corporations  find  themselves 
taxed  in  very  widely  different  fashion,  according  to  the 


252         AMERICA  IN  WORLD  MARKETS 

one  of  the  five  zones  in  which  they  happen  to  have  estab- 
hshed  the  "sede  sociale,"  or  corporation  branch  domicile, 
in  Italy.  The  five  supreme  courts  sometimes  hold  in 
Rome  a  meeting  of  what  they  call  the  "United  Sections" 
and  decisions  reached  by  this  body  on  any  point  are 
final  law  for  the  whole  country,  but  they  have  not  yet 
done  so  for  the  complex  problems  of  business  taxation, 
and  the  best  the  foreigner  can  hope  to  do  at  present  in 
Italy  is  to  have  his  attorney  make  a  reasonable  bargain 
with  the  chief  tax  collector  of  the  zone  in  which  he 
happens  to  be  located.  The  chief  tax  collector  is  in 
practice  the  court  of  last  resort. 

All  this  is  to  be  changed,  if  the  new  plans  are  carried 
out,  for  the  Italian  merchants  and  manufacturers  them- 
selves have  almost  equally  serious  complaint  to  make 
against  the  taxation  system. 

A  proposal  which  the  association  makes  is  that  capital 
which  boldly  takes  risks  in  business  and  creates  and  multi- 
plies wealth  should  in  the  matter  of  taxation  receive  quite 
different  treatment  from  capital  which  takes  no  risks, 
and  that  corporations  should  not  be  taxed,  as  at  present, 
on  their  assets,  but  only  on  the  dividends  which  they 
have  earned.  In  the  matter  of  extra  taxation  to  pay  war 
debts,  "the  Government  should  reach  agreements  with 
the  producers  and  cause  as  little  upset  as  possible  to  the 
industries." 

New  tariff  regulations  are  also  demanded  for  Italy. 
The  association  does  not  take  sides  either  with  the 
principle  of  free  trade  or  that  of  extreme  protection, 
but  it  declares  that  a  tariff  wall  should  be  put  up  which 
will  protect  the  present  infant  industries  of  the  country 
until  they  can  take  care  of  themselves. 
The  high-cost-of-living  problem,  it  is  asserted,  which 


ITALY  253 

is  agitating  the  whole  nation  can  be  solved  if  the  Gov- 
ernment will  devote  its  resources  to  furthering  native  in- 
dustries so  that  they  can  supply  the  people's  urgent  needs 
without  relying  on  the  foreigner.  If  the  Germans  or 
other  foreigners  are  allowed  to  fight  Italy's  industries  in 
Italy  they  will  become  the  despotic  rulers  of  her  home 
markets. 

The  whole  system  of  State  administration,  the  Italian 
business  men's  proclamation  continues,  must  be  reformed 
and  remodelled,  if  the  State  is  to  furnish  effective  co- 
operation in  the  economic  development.  Bureaucracy 
and  centralisation  of  power  are  the  worst  evils.  Admin- 
istrative functions  must  be  made  more  elastic,  more 
prompt  and  more  suitable  to  the  purpose  for  which  they 
exist.  Red  tape  must  be  cut.  The  present  multiplicity 
of  offices  must  be  done  away  with ;  officials  must  be  made 
individually  responsible.  With  fewer  offices  it  will  be 
possible  to  pay  better  salaries  and  to  induce  competent 
men  to  accept  public  office. 

It  is  the  State's  duty  to  help  in  spreading  Italian  mer- 
chandise on  foreign  markets  and  in  finding  new  out- 
lets. An  advertising  campaign  on  a  national  basis  should 
be  prepared  for  this  purpose,  "to  make  known  abroad  the 
value  of  our  energies  and  to  elevate  the  prestige  of  the 
Italian  name,  which  had  fallen  low  in  the  long  years  of 
negligence  in  the  past."  Italian  merchants  and  manufac- 
turers will  undertake  to  do  their  part  in  this  regard,  but 
the  Government  must  second  their  efforts  actively  and 
consistently. 

The  immediate  task  is  to  keep  factories  built  in  war 
time  busy  and  to  keep  labor  employed.  The  great  pub- 
lic works  which  the  Government  has  already  decided  upon 
— the  installation  of  water-power  electric  plants,  as  well 


254.  AMERICA  IN  WORLD  MARKETS 

as  mining,  industrial  and  agricultural  development  work, 
especially  in  Southern  Italy — should  be  planned  out  in 
detail  and  materials  should  be  provided  for  them,  so  that 
work  may  soon  be  begun.  Work  should  at  once  be  begun, 
also,  for  creating  the  great  merchant  navy  which  the 
Government  is  pledged  to,  and  for  the  carrying  out  of 
the  harbor  improvements  so  much  needed  at  many  of 
the  Italian  ports. 

Scientific  research  in  the  interest  of  industrial  and 
manufacturing  enterprises,  it  is  further  recommended, 
should  be  set  on  foot  by  the  Government,  and  a  scheme  of 
new  banking  methods  and  credit  facilities  worked  out  for 
the  benefit  of  Italy's  industries  and  export  commerce. 
There  is  need  also  of  the  immediate  formulation  of  a 
vast  financial  plan  to  determine  the  means  not  merely  of 
paying  the  huge  war  bills,  but  also  of  providing  for  put- 
ting into  execution  the  peace  development  work  already 
planned.  In  this  way  there  would  be  no  sudden  stop  of 
activities,  but  a  gradual  transformation  process  which 
would  prevent  the  nation  from  being  stricken  with  a 
depression  panic. 

Italy  must  undertake  to  take  care  of  her  soldiers.  They 
must  not  be  subjected  to  the  temptation  to  emigrate. 
Work  must  be  ready  for  them  with  the  assurance  of 
good  returns  for  it  to  compensate  them  for  the  tremen- 
dous sacrifices  endured  for  the  country.  Hereafter  Ital- 
ian labor  must  be  kept  at  home.  Instead  of  an  "emigra- 
tion of  men,"  Italy  must  arrange  for  an  "emigration  of 
products." 

Materials  of  all  kinds  will  have  to  be  sought  abroad. 
From  America  must  come  the  steel  and  iron  and  much 
of  the  construction  material  for  the  great  public  works 
that  are  planned,  and  these  should  be  arranged  for  at 


ITALY  265 

once  and  provision  made  for  a  continuance  of  the  coal, 
oil,  grain  and  equipment  supplies  which  had  been  con- 
tracted for  as  a  war  emergency.  From  America  is  ex- 
pected also  the  industrial  machinery  to  equip  the  Italian 
factories  for  peace  service,  and  provision  should  be  made 
for  it  as  far  as  possible  in  advance  of  the  time  of  its 
need,  so  as  to  insure  its  receipt  without  wasteful  delay. 

To  this  whole  "programme,"  or  outline  of  practical 
proposals  for  the  advantage  of  Italy,  the  Italian  capital- 
ists invite  the  co-operation  of  the  entire  nation  without 
regard  to  party  or  politics.  It  is  admittedly  a  programme 
which  exalts  the  State  and  demands  the  "sacrifice  of  an 
excessive  and  dangerous  individualism"  such  as  the 
notions  of  democracy  heretofore  prevailing  in  Italy  had 
fostered.  "But  this  is  not  the  hour,"  the  proclamation 
says,  "for  illusions,  for  discussions,  for  criticisms.  It  is 
the  hour  for  action,  for  deeds."  The  ground  must  be  cut 
from  under  the  feet  of  the  Bolshevist  agitators. 

It  may  be  added,  in  connection  with  this  declaration 
of  the  new  era  views  and  plans  for  action  of  Italy's  mer- 
chants and  manufacturers,  that  Italy  is  for  America  a 
foreign-market  opportunity  of  a  quite  exceptional  kind. 
Germany  had  dominated  the  market;  Italy  is  now  prac- 
tically making  an  appeal  to  this  country  to  come  in  in 
substitution. 

"There  is  the  most  serious  danger,"  a  member  of  the 
Italian  Commission  to  America  has  declared,  "that  the 
Germans  will  renew  their  grip  on  Italian  commercial  life. 
What  are  Italian  merchants  to  do?  They  are  in  dire 
need  of  merchandise  and  there,  practically  at  their  door, 
are  the  Germans  with,  as  we  have  reason  to  believe,  large 
stocks  of  the  very  wares  the  Italians  most  need  and  have 
been  accustomed  to  get  from  the  Germans  in  the  past. 


256  AMERICA  IN  WORLD  MARKETS 

the  Germans  eager  to  dump  them  on  the  ItaHan  market 
to  get  a  footing  once  more,  ready  to  sell  cheap  and  with 
six  months'  or  a  year's  credit.  The  Italians  struggle 
against  the  temptation  and  keep  their  eyes  fixed  towards 
America.  American  manufacturers  by  taking  prompt 
action  can  get  the  Italian  market  and  hold  it  for  them- 
selves. But  it  is  imperative  that  they  go  about  the  busi- 
ness in  the  right  way,  that  they  reveal  a  disposition  for 
mutual  service  and,  above  all,  that  they  waste  no  time." 

A  combination,  under  Government  supervision,  has 
been  arranged  between  four  of  the  principal  commercial 
banking  institutions — the  Banca  Commerciale  Italiana, 
the  Credito  Italiano,  the  Banca  Italiana  di  Sconto  and 
the  Banco  di  Roma,  It  is  to  continue  for  two  years  after 
the  signing  of  peace.  Agreements  covering  commercial 
credits,  loans  and  accounts,  loans  in  the  public  interest 
and  the  financing  of  national  industrial  undertakings  have 
been  reached  by  the  combination.  The  banks  are  to  make 
a  common  investigation  of  commercial  conditions  and 
needs,  to  co-operate  in  providing  the  largest  possible 
measure  of  industrial  and  commercial  self-sufficiency  for 
Italy,  to  find  new  markets  for  Italian  products,  to  co- 
ordinate the  smaller  banks  and  private  banking  institu- 
tions for  the  same  general  purpose,  and  to  adopt  the  mos£ 
liberal  financial  policy  for  the  nation's  benefit. 

These  banks  have  established  branches  in  the  United 
States  to  assist  in  every  way  possible  in  developing  trade 
and  commerce  between  the  two  countries. 


CHAPTER  V 


GERMANY 


Twofold  Function  of  Ministry  of  Economics — An  Export 
Trade  Organisation  Formed — Bureau  for  Re-establish- 
ing German  Prestige  and  Commerce  Abroad — New 
Intensive  Study  of  Foreign  Countries  With  View  to 
Trade — Expected  Nationalisation  of  Many  Industries 
— How  Germans  Expect  to  Retrieve  Their  Losses. 

Germany's  elaborate  plans  for  the  after-war  period 
have  already  been  referred  to  in  some  detail.  The  Min- 
istry of  Economics  was  established  on  October  21,  1917, 
and  was  divided  into  two  main  sections,  one  dealing 
with  economic  questions,  customs,  tariffs,  monopolies, 
syndicates,  etc.,  and  the  other  section  dealing  with  social 
questions,  such  as  unemployment,  insurance,  housing  and 
the  like.  The  Commission  for  Transition  Economy  has 
already  been  described. 

Germany's  main  concern  was  with  the  problem  of 
securing  raw  materials — and  chiefly  the  textile  fibres, 
leather,  rubber,  oil  and  fats — for  her  industrial  purposes 
after  the  war,  and  with  shipping  to  handle  her  exports 
and  imports.  A  monopoly  of  the  importation  of  raw 
materials  is  said  to  be  among  the  projects  of  the  Ger- 
man authorities,  and  monopolies  of  other  kinds,  as  on 
sugar,  spirits,  petroleum  and  insurance,  are  regarded  as 
among  future  developments  in  Germany,  and  it  is  not 
improbable  that  buying,  selling  and  manufacturing  of  the 

257 


258  AMERICA  IN  WORLD  MARKETS 

important  commodities  and  products  will  be  kept  under 
Government  control,  at  least  temporarily,  for  the 
economic  benefit  of  the  country.  The  industrial  com- 
binations and  concentrations  which  were  forcibly 
brought  about  in  Germany  during  the  war  are  likely  to 
be  continued. 

A  German  export  trade  organisation,  somewhat  on 
the  lines  of  the  British  Trade  Corporation,  has  been  or- 
ganised, it  is  said,  in  Germany  with  a  capital  of  25,000,- 
000  marks,  to  undertake  the  construction  and  operation 
of  railroads,  irrigation  plants,  harbors,  electric  plants, 
factories;  to  operate  plantations  and  mines,  and  to  form 
and  participate  in  subsidiary  concerns.  Among  the  Ger- 
man firms  announced  as  being  represented  on  the  Board 
of  Directors  are  the  North  German  Bank,  the  Dresdner 
Bank,  the  Hamburg-American  Steamship  Company,  the 
Rheinish-Westphalian  Coal  Syndicate,  Krupps,  Siemens- 
Schuckert  and  others. 

In  Berlin  there  has  been  established  a  central  office 
"Fiir  Auslandsdienst,"  the  purpose  of  which  is  to  de- 
termine the  means  of  re-establishing  the  prestige  and  the 
commerce  of  Germany  abroad. 

The  Germans  are  also  planning  the  organisation  of 
a  superior  training  and  education  institution,  "Fiir  Aus- 
landskunde,"  for  the  knowledge  of  foreign  countries. 
This  organisation  is  to  be  dependent  on  the  universities 
and  is  to  oflFer  to  the  students  the  means  of  getting  a 
complete  and  detailed  knowledge  of  the  countries  where 
they  might  be  called  to  exert  their  activities  as  diplomats, 
missionaries,  professors,  doctors  or  business  men.  The 
University  of  Bonn  is  to  be  the  centre  for  the  special 
study  of  the  Latin  and  Latin-American  countries.  In 
that  University,  for  instance,  French,  Italian,  Spanish 


GERMANY  259 

and  Roumanian  will  be  studied  to  an  exceptional  extent, 
and  geography,  history,  social  and  military  organisation, 
the  character,  the  tastes,  the  economic  and  intellectual 
needs  of  the  Latin  peoples  will  be  made  the  object  of 
profound  study.  In  the  same  way  other  universities  will 
deal  with  other  ethnical  or  geographical  zones  of  the 
world.  The  Germans  seem  to  be  far  from  having  re- 
nounced their  comprehensive  method  of  economic  con- 
quest. 

Germany,  as  a  federation  of  "republics,"  will,  it  is  ex- 
pected, undertake  the  nationalisation  of  many  great  in- 
dustries in  the  form  of  an  enforced  syndicalisation  under 
government  control.  The  new  condition  in  this  case 
would  be  but  little  different  from  that  which  prevailed 
during  the  war,  when  the  concentration  of  German  in- 
dustries was  conceived  not  merely  for  military  purposes, 
but  also  for  more  effective  economic  effort  after  the  war. 

President  Ebert  announced  that  arrangements  had 
been  made  for  the  combination  and  "socialistic  opera- 
tion" of  various  branches  of  business  that  were  to  be 
handled  as  State  monopolies. 

German  leaders  have  been  wasting  little  time  discuss- 
ing the  philosophy  of  economic  laws  or  theorems  of 
sociology.  In  their  practical  way  they  have  been  pound- 
ing home  concrete  facts.  The  war  imposed  heavy  bur- 
dens on  all  the  nations  that  took  part  in  it.  There  is 
only  one  way  to  lighten  the  burden,  to  repair  the  waste, 
to  make  up  the  losses,  to  reduce  the  debt.  Work !  The 
thing  can  be  done.  Germany  can  turn  defeat  into  vic- 
tory. She  can  make  good  what  she  lost;  she  can  be- 
come great  and  powerful  once  more;  she  can  resume  her 
former  dominant  position  in  world  commerce.  There  is 
just  one  condition — work.     Work  that  is  untiring,  reso- 


260  AMERICA  IN  WORLD  MARKETS 

lute,  systematic — improbus  labor — work  that  is  uncon- 
scionable, reckless,  relentless,  extravagantly  energetic. 
All  Germany,  everybody  in  Germany,  must  work  as  they 
never  worked  before.  And  Germans  can  work.  Work 
made  them  commercial  world  conquerors.  Work  will 
once  more  give  them  supremacy. 


CHAPTER  VI 


FOREIGN  TRADE  SERVICE 


State  Department  Proposes  Consular  Increase — ^To 
Make  Service  Strictly  American — New  Economic  Ex- 
perts— Better  Pay  for  Consuls — Overwhelming  Duties 
Imposed  on  Them — Foreign  and  Domestic  Commerce 
Bureau  to  Expand — Valuable  Services  Which  It  Ren- 
ders— To  Explore  Foreign  Areas. 

The  State  Department,  on  which  the  consular  service 
depends,  requested  from  Congress  an  increase  of  more 
than  $1,000,000  in  its  1919-1920  appropriation  for  its 
foreign  service  programme.  A  considerable  part  of  this 
sum  is  eventually  for  the  development  of  the  consular 
service.  It  is  planned  to  increase  the  number  of  consuls 
by  25,  to  appoint  150  consuls  of  career  and  to  create 
a  new  office,  that  of  "economic  expert."  The  economic 
experts,  of  whom  it  is  proposed  to  have  twenty-five, 
are  to  be  men  trained  in  business  who  can  be  sent  to  the 
various  consular  offices  to  study  the  situation,  to  relieve 
consuls-general,  to  gather  information  of  interest  to 
industry  at  home  and  such  information  also  as  will  be 
of  value  to  the  country  when  it  is  negotiating  commer- 
cial treaties  and  preparing  tariffs.  The  twenty-five  new 
consuls  are  destined  to  be  sent  for  the  most  part  to  re- 
mote regions  where  ultimately  they  may  be  needed,  where 
American  ships  may  put  in  and  where  American  trade 
may  be  established. 

261 


262  AMERICA  IN  WORLD  MARKETS 

The  150  vice-consuls  are  mainly  to  replace  existing 
consular  agents.    All  these  must  be  Americans. 

The  war  found  American  interests  in  out-of-the-way 
places  often  in  the  hands  of  non-Americans,  consular 
agents,  receiving  no  salary,  remunerated  only  by  fees 
commonly  totalling  less  than  $100  a  year,  men  who  cared 
nothing  about  the  United  States  apart  from  the  fees  it 
made  it  possible  for  them  to  earn.  Even  in  the  future, 
although  the  purpose  is  to  make  the  service  as  American 
as  possible,  it  is  considered  unavoidable  to  continue  to 
employ  such  foreign  consular  agents  on  the  fee  plan,  in 
parts  of  Turkey  and  Russia ;  but  they  will  have  no  access 
to  confidential  matters  and  will  know  nothing  of  Ameri- 
can plans  for  trade  expansion.  It  is  also  planned  to  in- 
crease the  salaries  of  some  of  the  classes  of  consuls, 
chiefly  those  of  the  $2,000  class,  the  most  numerous  of 
all. 

The  consul's  duties  are  of  bewildering  variety  and 
extent.  He  is  a  notary,  a  dozen  kinds  of  ship  function- 
ary, in  some  places  a  judge,  an  arbiter  of  disputes,  a 
purchasing  agent,  a  direct  representative  of  the  State 
Department,  an  indirect  representative  of  all  the  other 
Departments  as  well  as  of  the  hundred  odd  million 
people  of  the  United  States.  During  the  war  our  con- 
suls were  "The  Government"  abroad.  They  were  en- 
trusted with  making  purchases  for  the  Army  and  Navy ; 
$2,000  consuls  were  carrying  through  transactions  in  re- 
mote places  involving  many  millions  of  dollars  on  mere 
brief  cable  orders  from  home.  They  handled  the  financ- 
ing of  shipping  for  the  United  States  Shipping  Board 
and  they  conducted  business  of  endless  variety.  The 
American  consular  service  covered  itself  with  glory  dur- 
ing the  war. 


FOREIGN  TRADE  SERVICE  263 

It  is  from  the  American  consuls  that  the  great  body  of 
general  information  on  foreign  business  and  on  foreign 
markets  seems  to  be  expected.  The  consuls  do  send  in  a 
great  deal  of  commercial  information.  But  how  could  it 
be  expected  to  be  fresh,  valuable  or  even  correct?  The 
consuls  are  over-worked  and  miserably  underpaid.  They 
cannot  at  their  discretion  run  up  expense  accounts. 
Where  are  they  going  to  get  the  live  exclusive  trade  news 
that  is  to  be  of  benefit  at  home  ?  They  stick  nobly  to  the 
service,  but  many  of  them  are  forced  to  resign  out  of 
sheer  inability  to  keep  body  and  soul  together  for  them- 
selves and  families  on  the  wretchedly  inadequate  salaries 
they  receive.  They  invariably  can  get  better-paid  posi- 
tions than  the  service  offers  them.  It  is  clear  that,  under 
the  present  circumstances,  American  industry  cannot 
count  very  much  on  the  consular  service  in  helping  to 
solve  the  problem  of  establishing  a  foreign  commerce. 

The  branch  of  the  Government  which  more  directly  and 
immediately  represents  the  interests  of  American  ir^- 
dustry  for  the  purposes  of  foreign  commerce  is  the 
Bureau  of  Foreign  and  Domestic  Commerce  of  the  De- 
partment of  Commerce.  This  Bureau  has  established 
for  itself  among  business  men  throughout  the  country  an 
exalted  reputation  for  its  admirable  organisation  and  for 
the  highly  practical  nature  of  the  commercial  service 
which  it  renders.  This  was  testified  to  during  the  past 
year  when  the  Bureau  was  called  upon  for  aid  by  the 
Shipping  Board,  the  War  Trade  Board,  the  War  Indus- 
tries Board,  when  it  assisted  in  the  organisation  of  for- 
eign service  for  other  branches  of  the  Government;  ad- 
vised on  war-time  legislation;  purchased  foreign  raw 
materials  for  the  Army  and  Navy;  straightened  out  the 
war-time  difficulties  for  many  manufacturing  concerns. 


264i         AMERICA  IN  WORLD  MARKETS 

and  engaged  in  commercial  education  work  in  many  parts 
of  the  country. 

Ahead  of  any  institution  of  its  kind  in  any  other  land, 
in  fact  accepted  as  the  model  for  imitation  by  the  other 
leading  countries,  the  Bureau  has  been  accomplishing  this 
admirable  achievement  on  an  annual  appropriation  of 
around  $500,000 — last  fiscal  year  a  little  under  that  sum, 
this  fiscal  year  a  little  over  it. 

For  the  fiscal  year  1920  the  Bureau  is  now  seeking  an 
increase  of  over  $800,000,  or  a  total  of  $1,365,470.  As 
a  matter  of  fact  it  ought  to  have  at  least  that  much  to 
spend  in  every  single  country  important  to  the  United 
States  as  a  foreign  market  or  as  a  competitor,  and  pro- 
portionate sums  in  the  countries  of  minor  importance. 
In  that  way  it  would  be  enabled  to  render  to  American 
industry  a  foreign  service  commensurate  with  the  effi- 
ciency of  its  home  organisation. 

The  Bureau  controls  eleven  commercial  attaches — men 
with  fixed  domicile  and  an  office  force — in  leading  capi- 
tals. It  plans  to  add  on  nine  more,  and  to  locate  them 
in  Canada,  Italy,  Spain,  Greece,  Moscow,  Mexico,  Cuba, 
Panama  and  Chile.  It  desires  to  increase  its  trade  com- 
missioners— expert  business  investigators  with  a  roving 
commission — from  ten  to  twelve  in  Latin-America,  from 
seven  to  fourteen  in  the  Far  East  and  from  twenty  to 
twenty-eight  in  other  countries.  Some  of  these  it  would 
establish  in  new  fields  whose  trade  possibilities  have 
never  been  thoroughly  studied — Colombia,  Venezuela, 
Ecuador,  Bolivia,  Paraguay  and  many  regions  in  the 
great  stretch  eastwards  from  Suez  to  the  Philippines. 
The  good  that  the  twenty-six  more  men  will  do  under 
the  direction  of  such  an  organisation  will  undoubtedly 
be  considerable,  but  until  Congress  grants  to  the  Bureau, 


FOREIGN  TRADE  SERVICE  265 

not  a  small  percentage  increase  in  its  field  force,  but  a 
multiplying  of  that  force  tenfold  and  twenty  fold,  the 
manufacturers  of  America  must  understand  that  on  their 
own  shoulders  lies  the  burden  of  performing  certain  very 
important  duties  in  the  opening  up  of  foreign  markets 
for  the  individual  industries. 

With  men  competent  to  speak  on  the  question  of  orig- 
inating foreign  trade,  I  have  discussed  practical  ways  of 
going  about  the  matter  and  have  found  rather  indefinite 
and  widely  varying  opinions.  One  of  them  is  the  Execu- 
tive Secretary  of  a  great  association  of  merchants.  It 
is  his  judgment  that  not  until  the  American  manufac- 
turer has  reached  the  state  of  mind  where  he  can  con- 
ceive a  foreign  market,  not  as  a  dumping  ground  for  his 
surplus,  but  as  a  primary  market  in  the  truest  sense, 
will  it  be  wise  for  him  to  take  another  step  towards 
getting  into  that  market. 

"When  his  mind  has  reacted  to  this  extent,"  he  added, 
"he  must  begin  to  study  the  foreign  market,  as  he  would 
study  the  home  market,  to  determine  what  class,  char- 
acter and  styles  of  goods  that  market  demands  and  will 
purchase.  Until  he  devotes  the  same  business  acumen 
and  the  same  business  skill  to  penetrating  the  foreign 
market,  as  he  does  with  regard  to  the  home  market,  he 
will  not  open  the  foreign  market  to  himself,  or,  having 
opened  it,  he  will  not  hold  it.  He  must  learn  not  only 
what  the  foreigners  want,  but  how  they  want  it — details 
on  payments,  on  methods  of  packing  and  shipping,  and 
so  on.'* 

With  regard  to  the  way  in  which  the  American  manu- 
facturer is  to  seek  information  about  markets  generally, 
and  about  the  one  in  particular  which  he  may  be  plan- 
ning to  invade,  this  authority  declares  that  the  manu- 


we         AMERICA  IN  WORLD  MARKETS 

facturer  must  proceed  in  the  matter  in  a  strictly  busi- 
nesslike way.  "lie  cannot  expect  his  Government  to  do 
his  business  for  him.  Where  a  firm  is  sufficiently  strong 
to  go  into  the  field  with  its  own  agents  and  at  its  own 
expense,  that  I  believe  is  the  better  way  to  do  it.  But 
in  the  case  of  the  smaller  manufacturers,  or  of  the  great 
manufacturers  projecting  only  a  small  foreign  business, 
I  should  think  that  the  export  commission  houses  would 
supply  the  deficiency.  They  might  be  looked  to  for  in- 
formation and  details  regarding  the  countries  with  which 
in  a  special  way  they  keep  in  communication.  In  this 
way  the  manufacturer  should  be  able  to  learn  important 
facts  regarding  the  foreigner's  point  of  view,  his  method 
of  doing  business  and  his  special  requirements,  so  that 
the  manufacturer  may  adapt  his  sales  machinery  in  con- 
formity with  same." 

Another  authority,  the  President  of  a  club  of  men 
engaged  in  merchandising  and  distributing,  one  with  per- 
sonal experience  in  the  field,  had  this  to  say :  "What  I 
would  advise  is  the  formation  by  American  manufac- 
turers of  foreign  sales  organisations.  I  would,  for  in- 
stance, gather  into  one  club  fifteen  or  twenty  non-com- 
peting industries  that  were  desirous,  not  of  experiment- 
ing, but  of  actually  going  ahead  and  doing  business  in 
foreign  countries.  Cooperative  selling  plans  would  be 
worked  out;  salesmen  would  be  taught  the  various  lines 
and  would  be  trained  in  collecting  practical  market  in- 
formation— not  from  books  or  reports,  but  on  the 
ground.  The  policy  would  be  to  select  the  right  men, 
pay  them  the  right  price  and  send  them  out  to  get  the 
business.  The  central  office,  equipped  with  all  the  com- 
mercial information,  prices,  deliveries  and  the  like,  would 
also  be  the  co-operative  clearing  house.    Expenses  would 


FOREIGN  TRADE  SERVICE  267 

be  divided  up,  thus  minimising  this  usually  most  formid- 
able cost  item  of  foreign  salesmanship." 

Another,  who  has  directed  for  a  great  manufacturing 
corporation  a  selling  organisation  distributed  around  the 
globe,  is  not  in  entire  accord  with  the  idea  of  counting 
on  export  commission  houses  for  the  establishment  of 
a  foreign  market,  as  such  firms,  in  his  view,  have  their 
own  special  and  most  valuable  function,  but  one  which 
imposes  on  them  the  obligation  of  being  in  touch  with 
the  broadest  sort  of  a  field.  Accordingly  they  could  not 
be  expected  to  specialise  in  the  way  that  would  be  of 
practical  benefit  to  manufacturers  individually.  As  for 
the  export  club  idea,  he  was  inclined  to  think  it  might 
work  out  more  beneficially  if  it  included  only  manufac- 
turers who  were  competitors,  instead  of  being  non-com- 
petitors. A  group  of  competitors  could  agree  on  the  way 
to  ship  goods,  the  way  to  finance  shipments,  on  credits 
and  even  on  prices.  "I  can  imagine,"  he  said,  "that  a 
club  of  that  kind  might  be  a  boon  to  the  manufacturers 
composing  it  and  an  economic  benefit  to  American  indus- 
try as  a  whole." 

There  will  be  demand  from  the  United  States  on  a 
vast  scale  for  materials  and  machinery  to  reconstitute  the 
war-stricken  areas  and  the  industries  in  foreign  coun- 
tries stunted  by  the  great  struggle.  Producers  in  these 
lines  will  readily  get  in  touch  with  their  markets  through 
the  Department  of  Commerce  or  through  the  foreign 
commissions  already  established  in  this  country.  But 
the  export  business  that  is  of  most  importance  to  Amer- 
ica, the  business  that  would  steadily  and  continuously 
serve  to  convert  into  actual  values  the  enormous  poten- 
tial wealth  represented  in  America's  great  capacity  for 


268         AMERICA  IN  WORLD  MARKETS 

production,  is  not  of  the  kind  that  comes  knocking  at  the 
producer's  door. 

Obviously  hereafter  there  will  be  no  royal  road  to  for- 
eign trade.  Much  effort  will  have  to  be  spent  to  develop 
it.  Organisation  will  be  needed  and  it  is  clear  that  the 
manufacturers  of  the  country  in  general  are  without  ex- 
act data  regarding  the  method  of  procedure.  The  mat- 
ter is  one  well  worthy  of  the  attention  of  the  congress 
of  business  and  it  is  not  to  be  doubted  that  that  congress 
could  work  out  a  practicable  course  for  the  guidance  of 
the  manufacturers. 


CHAPTER  VII 

America's  representation  abroad 

Demand  Abroad  for  Reform  of  Diplomacy — Bureau- 
cratic Methods  to  Be  Modernised — Economic  Rather 
than  Political  Representation  Desired — Proposed  Di- 
rective Council  at  Home — Specialists  to  Control  Its 
Sub-Divisions — The  Tests  for  Foreign  Representa- 
tives. 

There  is  a  feeling  among  the  nations  that  the  old  way 
of  representation  of  a  country  in  foreign  lands  is  no 
longer  adequate  to  modern  times.  There  is  consequently 
a  fairly  general  demand  for  what  is  called  the  "reform 
of  diplomacy,"  and  what  in  reality  means  the  reform  of 
foreign  service  generally,  including  that  of  the  Depart- 
ment of  Foreign  Affairs  as  well  as  its  representatives, 
ambassadors,  ministers  and  consuls  and  special  agents 
in  foreign  countries. 

The  old  diplomacy  was  foimd  wanting  when  the  war 
began  and  the  prolongation  of  the  war  has  been  by  many 
attributed  to  the  blunders  of  diplomacy.  With  the  war 
ended,  it  is  felt  that  there  must  be  no  going  back  to  the 
old  way,  that  hereafter  representation  of  a  country 
should  be  based  even  more  on  economic  than  on  political 
considerations.  Commissions  in  several  countries  are  at 
present  considering  the  method  of  reforming  diplomacy 
and  foreign  service,  some  of  them  quietly  and  others 
more  or  less  openly. 

269 


870         AMERICA  IN  WORLD  MARKETS 

In  Italy  a  commission  with  several  subcommittees  has 
been  examining  the  problems  of  reform  of  State  admin- 
istration, of  simplification  of  bureaucratic  service  and  of 
better  representation  abroad.  The  nation's  representa- 
tives abroad  are  expected  to  be  in  the  future  the  militant 
forces  for  fighting  the  battles  of  the  nation's  expansion, 
and  consequently  representatives  in  the  League  of  Na- 
tions, in  embassies  and  in  consulates,  it  is  laid  down  as 
a  general  principle,  must  be  men  chosen,  not  because  of 
their  mental  and  educational  attainments,  their  capacity 
for  passing  examinations,  or  their  social  standing,  but 
because  in  the  active  world  they  have  manifested  notable 
qualities  of  leadership  and  general  capacity  for  promot- 
ing their  own  country's  interest  in  foreign  lands. 

It  is  needless  to  refer  to  the  weak  points  of  foreign 
representation  as  it  has  existed  in  the  past,  the  fact  that 
ambassadors  often  were  selected  for  their  social  graces 
and  for  their  wealth  and  that  between  them  and  the  func- 
tionaries who  filled  the  consular  offices  there  existed  a 
wide  gulf  which  even  the  interests  of  the  country  they 
were  representing  did  not  always  serve  to  bridge.  There 
has  been,  for  instance,  in  Italy  an  established  law  that 
an  ambassador  must  have  a  private  income  of  not  less 
than  $i,6oo,  that  there  must  be  recognised  interrelation- 
ship between  the  diplomatic  and  the  consular  services  and 
that  in  fact  there  must  be  a  passage  annually  of  at  least 
three  from  the  consular  service  to  the  diplomatic  service 
and  three  from  the  diplomatic  service  to  the  consular 
service.  Laws  have  been  passed,  from  Crispi's  day  to 
our  own,  regulating  these  questions,  but  often  they  have 
remained  a  dead  letter.  Consuls  sometimes  have  passed 
up  into  the  Italian  diplomatic  service,  but  in  spite  of  the 
Jaw  there  are  no  records  of  any  movements  from  the 


AMERICA'S  REPRESENTATION  ABROAD   271 

diplomatic  service  down  to  the  consular  service.  It  is 
felt  quite  generally  that  a  radical  and  far-reaching  re- 
form that  will  wipe  out  such  distinctions  between  func- 
tionaries must  be  eflfected  by  every  nation  in  its  own  in- 
terest if  it  is  to  avoid  the  likelihood  of  being  involved 
in  complications  and  confronted  with  serious  interna- 
tional problems  without  anything  like  fair  warning. 

As  a  matter  of  fact,  public  opinion  is  now  dealing  with 
questions  of  this  kind  and  public  opinion  will  in  the  fu- 
ture make  it  more  difficult  than  it  has  been  in  the  past  for 
nations  suddenly  to  find  themselves  at  war  without  the 
great  mass  of  the  public  knowing  the  why  or  the  where- 
fore. It  is  realised  also  that  for  the  individual  country 
the  national  policy  in  commerce,  finance,  economics  and 
public  information,  as  far  as  they  regard  foreign  rela- 
tions, should  be  unified  with  a  view  also  of  adding  to 
their  development  and  to  their  expansion. 

The  vital  thing  hereafter  will  be  the  foreign  relations 
of  economics,  of  industry  and  trade.  Diplomats,  con- 
suls, commercial  attaches,  will  have  to  be  men  trained 
for  united  work  in  furthering  national  economics  abroad. 
Their  functions  should  be  not  merely  academic — study- 
ing, gathering  information,  reporting — ^but  active  work, 
a  display  of  initiative,  of  creative  brain  power  in  the 
competitive  struggle  that  faces  all  the  nations  in  the 
future. 

Behind  them  at  home  should  be  a  directive  Council  of 
statesmen  and  experts,  with  subdivisions  dealing  with 
the  various  branches — commerce,  finance,  transportation, 
and  with  the  national,  political  and  economic  institutions 
of  the  country,  and  with  consideration  being  given  also 
to  the  representation  of  public  opinion  and  of  initiative 
deriving  from  the  public.     Such  a  Council  should  be  en- 


«7«         AMERICA  IN  WORLD  MARKETS 

dowed  with  authority  to  act  and  should  be  permanently 
and  uninterruptedly  in  session,  watching  developments, 
formulating  plans  and  putting  them  into  execution,  with 
business  leaders  of  the  country  in  the  important  directive 
and  consultative  positions,  and  with  a  specialised  per- 
sonnel always  available  for  special  missions  abroad. 

In  a  time  like  this  all  the  functions  of  government 
should  be  tingling  with  life  and  vibrating  with  energy, 
ready  and  eager  to  deal  in  effective  manner  with  the 
new  economic  conditions  which  it  is  so  important  for  the 
nation  to  confront  understandingly  and  to  shape  intel- 
ligently for  its  own  welfare. 

Many  ways  are  suggested  for  selecting  the  represen- 
tatives of  the  country  for  foreign  relations.  They  do 
not  exclude  the  method  of  examinations  with  the  prin- 
ciple of  selection.  They  imply  the  conferring  of  greater 
prestige  on  those  who  are  to  represent  the  country  and 
the  encouraging  in  them  of  the  willingness  to  assume 
risks,  to  accept  responsibility,  to  show  initiative,  and  to 
be  always  ready  and  active,  eager  to  study  new  things 
and  constantly  training  themselves.  Men  with  these 
qualifications  are  the  only  men  on  whom  a  country  can 
reasonably  confer  plenipotentiary  powers.  The  diplo- 
matic career  must  be  democratised,  though  it  is  impor- 
tant that  it  be  made  more  and  more  "aristocratic"  as  far 
as  practical  business  and  cultural  talent  are  concerned — 
that  is,  the  *'best"  are  the  men  to  whom  the  fortunes  of 
the  country  abroad  may  be  safely  entrusted.  Examina- 
tions do  not  prove  such  men;  they  prove  themselves  on 
the  firing  line.  The  power  of  selection  should  reside  in 
the  above  suggested  Council,  in  which  public  opinion  is 
accorded  representation. 

Geographical  zones  might  be  marked  out  and  special 


AMERICA'S  REPRESENTATION  ABROAD    273 

sub-divisions  of  the  Council  might  deal  with  them  in  a 
detailed  way.  The  experts  within  a  special  zone  should 
be  available  for  service  at  home  in  the  Council  or  for 
service  within  the  zone  regarding  which  they  are  experts. 
The  offices  in  foreign  countries  established  by  the  nation, 
chancelleries  or  consulates  or  commercial  bureaus,  should 
be  special  institutions  properly  organised  to  relieve  the 
diplomat,  the  consul,  the  commercial  attache,  the  trade 
commissioner  from  mere  routine  office  duties  which  he 
now  has  to  perform  and  should  be  stable  bureaus  which 
do  not  change  with  the  incumbent,  so  that  the  latter  can 
devote  his  time  and  energy  to  his  important  political- 
economic  functions. 

The  war  has  shown  how  to  find  the  fitting  men  for  the 
great  practical  services.  They  can  be  found  also  for  rep- 
resentation of  the  country  abroad  and  leading  business 
men  can  be  induced  to  participate  in  such  representation 
if  the  conditions  are  arranged  so  that  proper  treatment 
is  meted  out  to  them,  and  so  that  consideration  is  taken 
of  the  eminence  of  their  status  and  of  their  right  to  pro- 
tection from  unjust  attack. 


CHAPTER  VIII 


NATIONAL  PUBLICITY 


A  Form  of  Propaganda  Being  Widely  Adopted — For- 
eign Offices  Generally  Had  a  Publicity  Bureau — How 
Austria  Profited  by  Hers — German  Business  Men 
Originated  New  Scheme — Economic  and  Political 
Publicity — Important  That  Work  Hereafter  Be  Above- 
Board — Publicity  to  Promote  Industrial  Peace. 

The  four  years  of  war  have  brought  an  interesting 
evolution  in  the  views  of  statesmen  regarding  the  politi- 
cal and  economic  power  of  publicity.  The  Germans  en- 
tered the  war  with  their  "propaganda"  full-fledged ;  their 
preparedness  in  this  regard  had  been  complete.  When 
men  of  broad  judgment  urged  that  the  Allies  in  their 
great  and  intensive  work  of  organising  for  war,  after 
war  had  begun,  make  immediate  provision  also  for  the 
proper  representation  of  their  cause  and  of  their  side  of 
the  variety  of  questions  constantly  springing  up,  there 
were  other  voices  which  deprecated  the  idea.  But  as 
time  went  on  the  Allies  saw  that  publicity  was  essential 
as  a  political  and  economic  need  of  our  time.  To  neglect 
it  was  to  take  serious  risks.  The  Germans  were  work- 
ing their  propaganda  not  merely  to  influence  neutrals 
and  obtain  their  support,  but  also  to  split  the  Allies,  to 
interfere  with  their  commerce  arid  to  aflfect  it  in  the 
future.  It  reached  a  point  when  the  most  urgent  need 
was  for  publicity  among  the  Allies  themselves. 

France,  early  in  191 7,  created  the  office  of  Minister 

274 


NATIONAL  PUBLICITY  275 

of  Propaganda,  but  very  quickly  changed  the  title  to 
Minister  of  Inter-Allied  Relations.  The  incumbent  vis- 
ited the  United  States  and  other  countries,  in  fur- 
therance of  the  duties  of  this  office.  He  served  as  what 
we  might  term  a  "liaison  agent"  on  behalf  of  France 
with  the  countries  associated  with  her  in  the  war.  Later 
on  England  appointed  a  Minister  of  Propaganda  in  the 
person  of  Lord  Northclifife,  who  resigned  a  few  days 
after  the  armistice  was  concluded.  In  the  meantime 
France  and  England  had  been  coming  around  to  the  vital 
importance  of  publicity  for  their  cause.  Lord  North- 
cliffe,  considered  a  genius  of  publicity,  was  sent  to  the 
United  States  as  England's  chief  commissioner  for  war 
work.  A  distinguished  French  newspaper  man,  Mr. 
Andre  Tardieu,  came  as  French  High  Commissioner  and 
the  editor  of  Le  Matin,  Mr.  Stephana  Lausanne,  was 
made  a  member  of  the  Commission.  Italy  appointed 
Signor  Felice  Ferrero,  a  representative  in  New  York 
of  leading  publications  in  Italy  and  a  brother  of  the 
famous  historian,  as  head  of  a  bureau  of  Italian  propa- 
ganda in  the  United  States.  Similar  appointments  were 
made  in  countries  of  the  European  Allies  and  neutrals. 

In  neutral  lands  especially  there  was  keen  competi- 
tive rivalry,  for  the  Teutons  were  also  busy  and  their 
appreciation  of  propaganda  and  of  publicity  was  not  of 
recent  date.  Then  there  came  a  time,  marking  an  epoch 
in  the  development  of  the  whole  matter,  when  it  was 
realised  that  the  economic  interests  of  a  country  at  war 
had  no  less  urgent  need  of  publicity  than  its  political 
and  military  interests,  and  that  experienced  business  men 
were  best  qualified  to  determine  the  subject  matter  of 
publicity  abroad,  while  to  trained  publicists  might  be  en- 
trusted the  form  in  which  it  was  to  be  set  forth.    As  the 


276         AMERICA  IN  WORLD  MARKETS 

end  of  hostilities  approached,  and  the  broad  lines  of 
after-war  policy  were  being  laid  in  the  chief  European 
countries,  there  was  manifested  a  general  recognition 
of  the  established  importance  of  national  publicity. 
Whether  elevated  to  the  grade  of  a  permanent  office  or 
not,  publicity,  it  is  forecast,  will  be  a  conspicuous  gov- 
ernment function  in  all  the  leading  countries. 

The  United  States,  differing  radically  from  its  asso- 
ciates in  the  war  in  the  matter  of  economic  status  and  of 
economic  needs,  has  not  had,  for  this  and  other  reasons, 
the  same  impulsion  to  conform  promptly  to  the  new 
methods  and  practices  taken  up  by  the  other  nations  at 
war.  This  country,  however,  has  sooner  or  later  adopted 
most  of  the  important  innovations  that  the  war  has  made 
politically  or  economically  desirable  and  students  of  poli- 
tics are  aware  of  the  enormously  increased  prestige  of 
publicity  as  the  promoter  and  safeguard  of  democracy, 
so  that  there  is  no  reason  to  doubt  the  opinion  of  those 
close  to  the  administration  who  expect  the  establishment 
in  this  country  also  of  an  important  form  of  national 
publicity.  On  this  account  it  may  be  interesting  to  ex- 
amine the  phases  of  the  world  boom  of  publicity  and  to 
consider  what  are  likely  to  be  its  enduring  features  and 
what  its  prospective  eflfects.  What  also,  it  will  be  inter- 
esting to  ask,  is  to  be  the  proportionate  share  of  the 
Government  and  of  the  private  person  in  the  national 
publicity  scheme  that  may  ulteriorly  be  put  into  execu- 
tion? 

Austria  has  been  the  shining  example  of  the  country 
that  has  turned  publicity  to  marvellous  political  advan- 
tage. Almost  thirty  years  ago  the  Foreign  Office  in 
Vienna  took  over  the  direction  of  a  Correspondence  Bu- 
reau, which,  previously,  in  the  hands  of  private  parties, 


NATIONAL  PUBLICITY  277 

had  been  a  purveyor  of  news  of  a  more  or  less  official 
character.  Whoever  was  responsible  for  its  organisation 
and  management  under  the  new  auspices  deserves  a  trib- 
ute of  admiration  for  publicity  ability  of  a  very  high 
order. 

Some  expert  investigator  may  one  day  figure  out 
for  us  the  influence  on  international  politics,  on  the  des- 
tinies of  nations,  which  in  those  three  decades  that  Cor- 
respondence Bureau  wielded,  an  influence  more  potent 
than  that  of  all  the  Skoda  guns  Austria  ever  manufac- 
tured. In  the  meantime  it  may  be  stated  in  general  terms 
that  the  influence  was  enormous.  Let  us  judge  it  by 
the  results.  Even  almost  up  to  its  collapse  we  all  had 
a  mental  picture  of  the  Empire  of  Austria-Hungary  as 
a  great  prosperous  military  power  with  a  government 
that  was  tolerant,  magnanimous,  even  chivalrous,  ruling 
a  people  gay  and  laughter-loving,  effervescent  and  sen- 
suous as  the  Viennese  operetta,  and  second  only  to  the 
French  in  their  successful  cultivation  of  the  arts  and 
fashions.  If  any  foreign  nation  had  a  squabble  with 
Austria  we  were  more  likely  than  not  to  assume  that 
Austria's  side  of  the  dispute  was  the  side  of  courtesy 
and  sweet  reasonableness.  And  what  did  we  know  of 
the  Czecho-SIovaks,  of  the  Jugo-Slavs,  of  the  Serbians? 
If  we  were  interested  in  them  at  all,  we  understood  that 
they  were  a  bad  lot,  when  they  were  not  actually  un- 
civilised, illiterate  boors  of  inferior  mentality  and  of 
dangerous  instincts.  Vienna's  Foreign  Office  publicity 
managers  took  care  that  the  low  record  of  these  peoples 
should  be  available  to  the  world.  And  these  peoples, 
whom  we  now  suddenly  know  for  their  military  quali- 
ties— Serbia's  marvellous  war  record  will  be  an  imper- 
ishable monument  to  her,  while  the  knight-errant  achieve- 


278  AMERICA  IN  WORLD  MARKETS 

ments  of  the  Czecho-Slovaks  in  Russia  have  been  one  of 
the  glorious  events  of  the  war — and  whom  we  now  ap- 
preciate for  their  steadfastness  through  the  centuries  to 
their  ideals  of  freedom  and  of  justice,  had  writhed  un- 
der the  torture  of  misrepresentation,  for  the  world  was 
deaf  to  them,  hearing  only  one  side  of  the  case  and  con- 
sidering its  setting  forth  as  conclusive.  Italy  raged  for 
years  over  this  Austrian  Correspondence  Bureau.  Its 
methods  were  mild  and  insinuating,  rather  than  blunt  and 
aggressive.  It  kept  the  world  abroad  saturated  with  er- 
roneous and  derogatory  opinions  regarding  Italy  and  the 
Italian  people.  In  the  language  of  courtesy  and  moder- 
ation it  issued  the  most  damning  statements  about  Italy's 
territorial  aspirations  and  about  the  character  of  that 
country's  leading  men.  Italian  publicists  made  furious 
denials,  but  somehow  were  unheard.  Positive  statements 
have  more  news  value  and  secure  more  attention  than 
the  subsequent  denials  of  them.  During  the  war  the  Vi- 
enna Correspondence  Bureau  outdid  all  its  previous  per- 
formances, issuing  a  steady  flood  of  its  moderately- 
phrased  propaganda,  insidiously  aiming  to  sap  the  morale 
of  the  fighttng  forces  on  the  other  side,  and  at  times  help- 
ing to  do  So  in  certain  spots  with  censequences  perilous 
indeed  for  the  Allied  cause. 

The  German  methods  of  war  propaganda  are  too  well 
known  to  justify  any  description  of  them  here.  They 
were  carried  too  far  and  a  reaction  occurred. 

The  Hamburg  magnates,  men  like  Herr  Huldermann 
of  the  Hamburg-American  line,  and  the  late  Albert  Bal- 
lin,  demanded  that  the  German  propaganda  be  taken  out 
of  the  hands  of  the  military  authorities  and  entrusted  to 
the  business  men  who  had  experience  with  foreign  coun- 
tries, knew  the  modes  of  thought  and  the  ideals  of  other 


NATIONAL  PUBLICITY  879 

peoples  and  who  had  proved  by  experience  that  they  un- 
derstood how  to  make  the  most  desirable  kind  of  an  im- 
pression. 

Two  publicity  organisations  had  been  created  in  Ger- 
many early  in  1914  ostensibly  for  the  purpose  of  adver- 
tising Germany's  industry,  upholding  her  prestige  and 
gathering  information  for  the  benefit  of  her  foreign 
commerce.  The  plans  outlined  struck  the  British  Am- 
bassador in  Berlin  as  so  ominous  that  he  formally  warned 
his  Government  regarding  the  organisations.  The  Krupp 
Company,  Siemens-  Schuckert,  the  German  General  Elec- 
tricity Company,  the  Deutsche  Bank,  the  Hamburg- 
American  and  the  North  German  Lloyd  Companies  were 
among  the  big  concerns  composing  the  "syndikat"  rep- 
resentative of  Germany's  industry  and  commerce,  which 
paid  in  $125,000,  two-thirds  of  the  capital  stock  of  these 
publicity  enterprises.  The  German  Government  sub- 
scribed the  remaining  third  and  obtained  one-third  rep- 
resentation in  the  management.  The  supreme  direction 
was  vested  in  a  committee  of  three — a  Krupp  director, 
a  Deutsche  Bank  director  and  a  representative  of  the 
Foreign  Office — ^and  under  them  an  executive  council 
was  to  guide  the  work  of  influencing  the  press  at  home 
and  abroad  and  of  directing  the  secret  agents  of  the 
Syndikat  scattered  throughout  the  world.  But  for  va- 
rious reasons,  including  apparent  jealousy  on  the  part 
of  certain  export  publications  and  the  leaking  out  of  its 
secrets,  it  had  not  got  down  to  work  when  the  war  be- 
gan. Later  it  was  brought  out  for  actual  war  service. 
This  was  about  the  time  the  Allies  became  aware  of  the 
seriousness  of  the  "defeatist"  campaign  that  was  planned 
to  be  waged  in  France  and  Italy,  when  officials  in  the 


280  AMERICA  IN  WORLD  MARKETS 

United  States  had  unearthed  the  evidence  that  led  to 
the  execution  of  Bolo  Pasha. 

The  big  business  firms  of  Germany  which  before  the 
war  had  set  such  store  on  the  great  export  monthly  pub- 
lications— such  as  the  Deutsche  Export  Revue,  for  all 
kinds  of  German  trade,  and  others  such  as  the  Chemiker 
Export  Zeitung,  for  special  industries — and  on  the  week- 
ly periodicals  and  special  editions  of  German  commercial 
newspapers  for  foreign  readers  in  their  own  language, 
now  demanded  that  these  media  be  again  made  the  prin- 
cipal channels  for  pouring  into  other  countries  the  flood 
of  information  best  calculated  to  be  of  benefit  to  Ger- 
many. German  publicity  in  the  last  phase  of  the  war 
was  getting  back  into  the  hands  of  business  men,  ap- 
parently without  too  much  interference  by  the  govern- 
ing authorities. 

The  lesson  which  the  war  has  taught  the  nations  re- 
garding the  need  and  the  uses  of  publicity  is  not  going 
to  be  unlearned.  Some  observers  see  an  indication  that 
a  nation's  publicity  is  more  and  more  being  regarded  as 
the  affair  chiefly  of  the  nation's  business  men. 

There  are  two  chief  classes  of  publicity  which  a  great 
nation's  interests  demand  in  our  day — political  publicity 
and  economic  publicity.  The  former  kind,  of  course,  is 
nothing  new,  but  is  now  considered  as  calling  for  new 
methods  of  exposition.  Most  of  the  great  powers  have 
long  had  in  their  Foreign  Ofiice  a  section  of  publicity, 
a  thing  of  secrecy,  the  true  character  of  which  was  usu- 
ally veiled  under  a  cryptic  name.  It  is  now  generally  felt 
that  political  publicity  is  too  vitally  important  to  a  coun- 
try to  be  kept  hidden  as  an  obscure  function  of  the  de- 
partment of  foreign  affairs,  that  it  should  be  out  in  the 
open,  an  honored  oflice  conducted  by  men  of  eminent 


NATIONAL  PUBLICITY  281 

attainments  and  of  experience  in  international  affairs. 
A  branch  of  this  form  of  publicity  might  be  devoted  to 
domestic  service,  to  exposing  trusts  and  combinations  or 
corporations  or  individuals  that  might  be  indulging  in 
noxious  commercial  practices  and  for  other  purposes. 

In  Great  Britain  a  domestic  form  of  national  publicity 
has  been  proposed  for  the  purpose  of  spreading  a  knowl- 
edge of  the  fundamental  principles  of  economic  laws,  of 
acquainting  the  whole  people  with  the  exact  facts  regard- 
ing industrial  questions  and  conditions,  of  impressing  on 
them  the  interdependency  of  all  classes  in  the  commu- 
nity and  of  intensifying  patriotic  sentiment.  This 
publicity  is  to  be  coupled  with  an  educational  campaign 
by  organisations  that  cannot  be  suspected  of  ulterior  mo- 
tives such  as  are  commonly  ascribed  to  politicians.  The 
State  can  no  longer  stand  aloof  from  industrial  disputes 
which  waste  national  resources  and  may  bleed  the  na- 
tion white.  Strife  between  the  parties  to  industry  must 
henceforth  be  regarded  as  a  dangerous  and  insidious 
form  of  civil  war  putting  the  nation's  prosperity,  as  well 
as  its  international  standing,  in  grave  peril.  Frank 
publicity  is  regarded  as  among  the  most  effective  means 
of  warding  off  the  danger  to  the  nation. 

A  nation's  economic  publicity,  on  the  other  hand,  is 
legitimately  considered  the  belonging  of  its  industry  and 
commerce.  There  is  a  divergence  of  views,  and  there 
may  be  a  divergence  in  practice  among  the  various  na- 
tions, as  to  the  uniting  or  the  keeping  apart  of  the  two 
forms  of  publicity,  but  there  can  be  no  doubt  that  a 
special,  distinct  and  honorable  establishment  will  be 
instituted  in  every  leading  country  for  the  propagating 
abroad  of  accurate  information  in  its  political  and  diplo- 
matic interests,  and  that,  either  directly  connected  there- 


289  AMERICA  IN  WORLD  MARKETS 

with  or  as  a  separate  establishment,  there  will  be  insti- 
tuted an  important  organisation  of  publicity  in  the  inter- 
est of  the  general  economic  life  and  well-being  of  the 
particular  country. 


CHAPTER  IX 

America's  need  for  foreign  trade 

Adventitious  War  Trade  Developed  Production  Capac- 
ity— Our  Normal  Market  Outgrown — New  Outlets 
Needed — Latin-America  Generally  Counted  On — South 
Africa  and  Australia — America  Practically  Pledged 
Not  to  Usurp  Foreign  Trade  of  Allies. 

During  the  war  we  have  had  a  foreign  trade  such  as 
no  nation  ever  had  before.  A  total  of  $9,000,000,000  in 
each  of  the  last  two  years  of  the  war;  a  balance  in  our 
favor  of  $3,000,000,000  in  each  of  the  last  three  years; 
in  payment,  gold  that  puts  us  in  possession  of  the  bulk 
of  the  world's  visible  supply  and  securities  and  services 
of  great  money  value. 

The  adventitious  trade  that  war  created  for  us  will 
continue  in  a  diminishing  way,  for  a  time  after  the  war. 
But  our  enormously  increased  capacity  for  production, 
far  in  advance  of  our  own  normal  consumption,  cannot 
be  allowed  to  shrivel  up.  In  the  present  condition  of  the 
world  upheaval,  depression  in  America  might  well  be 
disastrous.  An  outlet  must  be  found  for  our  increased 
capacity  for  production.  And  so  we  look  for  foreign 
markets. 

It  is  towards  Latin- America  that  the  eyes  of  American 
business  men  generally  are  turned  when  they  think  of 
foreign  trade  which  may  promise  to  be  remunerative  for 
them  and  devoid  of  the  complications  in  the  way  of 

283 


284  AMERICA  IN  WORLD  MARKETS 

credits,  of  restricted  profits,  of  obligation  to  buy  in  com- 
pensation for  the  privilege  of  selling,  which  they  con- 
ceive as  implied  in  trade  relations  with  the  nations  of 
Europe  which  have  recently  been  at  war  and  which  con- 
sider that  they  have  a  claim  on  the  co-operation  of  Amer- 
ica in  re-establishing  their  war-affected  commercial 
status. 

"It  has  been  the  policy  of  this  nation,"  said  a  resolu- 
tion adopted  at  the  Atlantic  City  business  congress,  "to 
cultivate  relations  of  close  sympathy  with  the  nations  of 
the  Western  hemisphere  as  expressed  in  the  Monroe 
Doctrine.  We  believe  that  these  relations  should  be  sup- 
plemented and  strengthened  by  a  vigorous  development 
of  our  commercial  and  financial  associations  with  our 
neighbors  of  North  and  South  America," 

South  America,  with  its  tremendous  natural  resources, 
is  an  open  field  for  endless  development  in  which  Amer- 
ican business  can  co-operate  and  can  share  in  the  rich 
returns.  Americans  are  practically  pledged  not  to  usurp 
the  foreign  trade  of  their  late  co-belligerents  by  any  un- 
ethical methods.  Germany's  trade  in  South  America, 
however,  is  a  legitimate  object  of  competition. 

The  German  never  conceived  his  mission  as  involving 
the  conferring  of  a  boon  on  those  through  whom  he 
profited.  It  was  no  part  of  his  task  to  help  in  building 
up  South  American  countries  for  the  benefit  of  those 
countries.  Englishmen  put  their  money  in  South  Amer- 
ican railroads,  Frenchmen  in  engineering  and  construc- 
tion works,  Americans  in  mines.  The  German  was  there 
to  profit  by  other  peoples'  risks.  He  sold  goods,  bought 
only  what  he  needed  or  could  resell,  had  banks  through 
which  to  loan  money  at  usurious  rates  for  his  own  benefit 
on  the  properties  and  values  created  by  the  enterprise 


AMERICA'S  NEED  FOR  FOREIGN  TRADE   285 

and  energy  of  others.  The  German  did  not  give  and 
take.  He  took;  greedily,  remorselessly,  with  scientific 
accuracy.  It  would  be  a  godsend  to  South  America  if 
Americans  replaced  the  Germans,  installing  the  methods 
of  co-operation  and  reciprocal  service  in  place  of  the  one- 
o.ded  grasping  methods  of  the  German.  Germany  had 
her  chance  and  failed.  The  United  States  can  go  in 
and  help  to  make  South  America  great. 

South  Africa  is  another  fair  field  of  great  promise, 
with  an  area  of  one  and  one-third  million  square  miles 
and  a  population  of  10,000,000.  Germany  used  to  sell 
$20,000,000  of  wares  there  annually  before  the  war. 
South  Africa's  imports  are  around  $200,000,000,  Great 
Britain  supplying  about  three-fourths  of  the  total  and  the 
United  States  about  one-seventh.  There  is  a  fine  legiti- 
mate fair-play  opportunity  for  Americans  who  can  help 
supply  the  means  for  South  Africa  to  produce  raw  ma- 
terials, to  develop  railroads,  to  install  industries  and  to 
grow  prosperous  commercially.  Americans  in  fact  are 
in  a  privileged  position  for  this  purpose,  if  only  ship- 
ping facilities  become  available. 

Australia  furnishes  somewhat  similar  opportunities, 
shipping  raw  materials,  chiefly  wool,  wheat  and  meat,  and 
importing  manufactured  articles,  clothes,  machinery, 
tools,  automobiles,  and  the  like.  Australia  in  191 7 
imported  $65,000,000  of  goods  for  a  population  of 
5,000,000,  being  thus  a  better  import  market  by  nearly 
fifteen  per  cent  than  Brazil,  with  almost  five  times  as 
many  inhabitants.  The  Australian  market  will  call  in 
a  particular  way  for  reciprocal  treatment  in  trade  rela- 
tions. 

The  opportunities  for  Americans  to  establish  foreign 
trade  will  be  many  and  alluring,  but  it  should  be  realised 


286  AMERICA  IN  WORLD  MARKETS 

that  in  order  to  grasp  them  in  the  best  way  and  to  build 
up  solid  and  permanent  foreign  outlets  on  which  the  in- 
dustries at  home  can  safely  rely  for  steady  flourishing 
commodities  there  must  be  secured  the  co-operation  of 
all  the  economic  forces  of  the  country,  and  in  particular 
the  banking,  manufacturing,  merchandising  and  trans- 
portation systems. 

"We  do  not  seek  to  extend  the  foreign  commerce  of 
the  United  States  at  the  expense  of  those  nations  with 
whom  we  have  fought  shoulder  to  shoulder  for  human 
happiness,"  said  George  Edmund  Smith,  President  of 
the  American  Manufacturers'  Export  Association;  "we 
desire  the  United  States  to  be  prosperous,  but  prosperous 
as  part  of  a  prosperous  world.  We  desire  to  increase 
America's  exports,  but  in  doing  this  we  recognise  that 
any  permanent  expansion  is  entirely  dependent  upon 
the  commercial  progress  of  the  nations  which  buy  our 
products.  We  make  no  secret  plans  for  the  exploitation 
of  other  peoples,  but  take  counsel  together  in  public  upon 
the  best  methods  for  meeting  the  world's  demands  for 
those  things  which  the  United  States,  because  of  its  nat- 
ural aptitudes,  can  make  better  or  cheaper  than  any  other 
country.  When,  therefore,  we  speak  of  foreign  trade  in 
this  connection,  we  speak  of  it  as  international  trade,  as 
an  interchange  of  commodities  and  wealth  among  all  the 
countries  of  th^  world  which  will  make  for  huirian  prog- 
ress." 


CHAPTER  X 

AMERICAN  SHIPS  AVAILABLE  FOR  COMMERCE 

Widely  Varying  Statements  Regarding  Tonnage — Erro- 
neous Impressions  Widespread — Mr.  Schwab's  Figures 
— Forecasts  Will  Not  Be  Realised — Our  Effective 
Ocean-Going  Tonnage — How  World's  Shipping  Has 
Deteriorated — Wear  and  Tear  of  War  and  Inferior 
Construction — Falling  Off  in  Construction. 

A  VITAL  question  for  American  manufacturers  con- 
templating the  development  of  foreign  trade  is  that  re- 
garding shipping.  To  what  extent  may  they  rely  upon 
American  shipping  to  carry  their  goods? 

The  volume  of  American  shipping  that  will  be  avail- 
able has  been  the  subject  of  many  statements  of  widely 
varying  nature. 

Mr.  Charles  M.  Schwab  has  stated  that  the  United 
States  Government  had  at  that  time  (first  week  of 
December)  under  its  control  between  6,000,000  and 
8,000,000  tons  of  merchant  shipping  and  that  the  ship- 
building facilities  of  the  United  States  would  be  able  to 
produce  from  8,000,000  to  10,000,000  tons  of  merchant 
shipping  in  1919. 

The  impression  gained  by  many  of  Mr.  Schwab's 
hearers  was  that  this  country  is  likely  to  have  from 
14,000,000  to  18,000,000  tons  of  merchant  shipping 
by  the  beginning  of  the  year  1920.  And  yet  in  reality 
this  is  so  utterly  unlikely  that  it  would  be  a  serious  error 

S87 


288  AMERICA  IN  WORLD  MARKETS 

for  American  industry  to  lay  its  plans  with  any  such  ex- 
pectation regarding  America's  prospective  tonnage  as 
any  part  of  their  foundation. 

It  was  pleasant  in  war  time  to  get  the  good  news  re- 
garding our  great  shipping  programme.  The  work  ac- 
complished was  a  proud  achievement  for  the  nation.  The 
plans  ahead  were  on  a  scale  that  justified  the  highest 
expectations.  But  the  end  of  the  war  meant  a  great 
change  in  the  merchant  shipping  programme.  That  pro- 
gramme was  a  war  measure.  The  United  States  Gov- 
ernment was  in  the  business  of  building  cargo  ships  at 
the  fastest  possible  pace  merely  because  it  was  an  ur- 
gently necessary  step  in  the  prosecution  of  the  w^r. 

What  the  Government  would  do  in  the  matter  after 
the  war  was  quite  another  question.  Those  in  a  posi- 
tion to  conjecture,  with  the  greatest  probability  of  ac- 
curacy, on  the  subject  do  not  for  a  moment  believe  that 
Congress  will  authorise  the  continuance  of  merchant 
shipbuilding  with  public  funds  on  any  such  progressive 
scale  as  in  the  past  year.  Congress  may  be  impressed 
by  statements  frequently  heard  that  if  all  the  nations  car- 
ried out  their  shipbuilding  projects  and  programmes  the 
world  within  a  very  few  years  would  have  an  undesirable 
excess  of  tonnage.  At  any  rate  the  slackening  up  in  the 
months  following  the  signing  of  the  armistice  is  taken  by 
many  as  an  indication  that  the  peak  of  production  is 
already  behind  us. 

This  does  not  mean  that  the  figures  and  announcements 
of  Mr.  Schwab  and  others  who  can  speak  authoritatively 
are  being  called  in  question.  What  is  intended  to  be  con- 
veyed is  that  the  impression  gained  in  American  business 
circles,  to  the  effect  that  this  country  at  an  early  date 


AMERICA'S  MERCHANT  SHIPPING       289 

is  going  to  be  provided  with  a  great  volume  of  merchant 
shipping,  is  far  from  accurate. 

Mr.  Schwab  in  addressing  a  gathering  of  American 
business  men  probably  assumed  that  they  grasped  his 
facts  in  the  terms  in  which  he  had  conceived  them  and 
had  for  many  months  dealt  with  them,  as  Director-Gen- 
eral of  the  Emergency  Fleet  Corporation.  His  calcula- 
tions were  in  accordance  with  the  methods  of  the  United 
States  Shipping  Board.  The  Board,  it  should  be  known, 
expresses  tonnage  in  dead-weight  tons. 

The  reason  for  its  departing  from  the  general  rule  of 
figuring  in  gross  tons  is  that  it  dealt  mainly  with  cargo 
boats  and  sought  the  expression  that  would  most  closely 
indicate  bulk  tonnage  capacit}^  Gross  tonnage,  roughly 
figuring,  is  two-thirds  of  dead-weight  tonnage.  The 
Board  considers  only  ships  of  i,ooo  gross  tons  and  up- 
wards. Mr.  Schwab's  figures  then  would  indicate  that 
the  United  States  Shipping  Board  has  in  its  control  from 
4,000,000  to  5,333,000  gross  tons  of  merchant  ships  of 
at  least  1,000  tons.  But  not  all  of  these  are  American 
ships,  for  they  include  ships  taken  over,  ships  comman- 
deered while  under  construction  for  other  countries  and 
chartered  ships  of  foreign  registry. 

Tonnage  figures  are  apt  to  be  tricky  and  misleading 
and  the  round  numbers  one  sees  quoted  must  be  exam- 
ined for  what  they  imply  or  what  they  omit.  So  many 
are  the  points  to  be  taken  into  account  that  it  is  only  with 
great  care,  and  with  many  provisos,  that  figures  can  be 
set  forth  regarding  merchant  marine  tonnage  to  convey 
the  broad  general  information  of  which  every  American 
concerned  in  the  development  of  the  country's  trade  and 
commerce  should  be  in  possession.  The  facts  and  figures 
here  given  have  been  checked  at  the  Bureau  of  Naviga- 


290  AMERICA  IN  WORLD  MARKETS 

tion  of  the  Department  of  Commerce  in  personal  discus- 
sion with  Commissioner  Chamberlain,  chief  of  the  Bu- 
reau, one  of  the  recognised  world  authorities  on  the  sub- 
ject. 

The  total  gross  tonnage  of  United  States  merchant 
shipping  at  the  end  of  the  year  1918  is  placed  at 
11,400,000  tons.  This  includes  all  kinds  of  craft,  ocean- 
going, coastwise,  vessels  that  navigate  harbors  and 
rivers  and  even  canals,  all  boats  large  and  small  that 
need  Custom  House  documents  to  engage  in  trade. 

The  effective  ocean-going  tonnage  of  steamships  of 
1,000  gross  tons  and  upwards  of  American  registry  and 
ownership  was  in  round  figures  5,000,000  gross  tons 
on  January  i,  1919.  It  was  declared  that  the  total  was 
not  50,000  tons  out  of  the  way  on  either  side  in  this  cal- 
culation, the  variation  to  be  taken  into  account  being  the 
exact  amount  of  the  new  construction  for  the  United 
States  Shipping  Board  to  be  delivered  or  to  be  officially 
numbered  at  that  time.  To  this  figure  should  be  added 
500,000  tons  of  sea-going  sailing  vessels  of  1,000  tons 
and  up,  including  coal  barges,  which  constitute  an  im- 
portant item  in  the  total.  The  United  States  thus  had 
less  than  5,500,000  tons  of  ocean-going  shipping  capable 
of  general  service  in  foreign  trade.  Nor  is  this  all. 
Without  entering  into  the  question  of  the  obligation  of 
utilising  American  shipping  in  the  supplying  and  in  the 
repatriation  of  the  American  Army  abroad,  in  the  fur- 
nishing of  assistance  to  war-afflicted  countries  and  in  the 
carrying  of  materials  to  devastated  lands,  there  are  other 
considerations  which  affect  the  availability  of  American 
merchant  shipping  for  foreign  commerce. 

The  world's  gross  tonnage  before  the  war,  according 
to  LIo3''d's  figures,  was  49,089,552  tons.     The  best  au- 


AMERICA'S  MERCHANT  SHIPPING       291 

thorities  estimate  the  war  loss  of  merchant  tonnage  in 
round  figures  at  10,000,000  tons.  Besides  this  there  is 
to  be  considered  the  normal  annual  loss  of  about 
1,000,000  tons.  New  construction  only  partly  made  up 
the  tonnage  figures,  so  that  at  the  end  of  19 18  it  was  cal- 
culated the  world's  gross  tonnage  was  44,500,000.  A 
very  important  point  that  has  not  heretofore  been  con- 
sidered is  that  this  44,500,000  tons  of  to-day  does  not 
by  any  means  correspond  with  44,500,000  tons  of  the 
total  49,000,000  of  approximately  five  years  ago.  As  a 
body  of  tonnage  it  is  a  long  way  inferior,  and  if  the  in- 
feriority could  be  expressed  in  exact  percentage  it  would 
most  probably  show  that  the  world  is  very  much  poorer 
in  merchant  shipping  than  it  was  before  Germany  sprung 
the  war  of  devastation  on  the  world. 

The  wear  and  tear  on  ships  in  those  years  has  been  so 
tremendous  that  it  may  be  said  that  they  are  no  longer 
the  same  ships.  Never  were  ships  worked  so  hard  be- 
fore; never  did  ships  get  so  little  consideration  or  so 
little  chance  for  repair  and  for  recuperation.  Cases  of 
ships,  during  this  period,  falling  apart  and  foundering 
in  a  calm  sea  have  been  many ;  cases  of  exploding  boilers 
and  of  serious  engine  trouble  have  been  innumerable. 
A  considerable  percentage  of  the  ships  counted  in  this 
figure  of  world's  gross  tonnage  would  in  normal  times 
be  regarded  as  fit  only  for  the  junk  heap. 

Another  important  fact  to  be  considered  in  this  con- 
nection is  that  the  new  construction  of  to-day  is  not  up 
to  the  grade  of  ship  construction  before  the  war.  The 
average  of  the  new  ship  is  below  that  of  the  new  ship 
of  other  days.  This  does  not  mean  that  there  are  not 
exceptions,  that  the  United  States  has  not  been  turning 
out  fine   ships.     But  every  manufacturer  will  quickly 


292  AMERICA  IN  WORLD  MARKETS 

grasp  the  fact  that  in  shipbuilding,  as  in  all  other  war 
work,  the  demand  has  been  for  haste,  for  the  urgent  de- 
livery of  a  finished  article  that  will  serve,  that  in  the 
hurry  the  refinement  of  workmanship  and  of  finish  could 
not  be  insisted  on,  that  the  high-grade  materials  went 
into  the  weapons  of  the  battlefield  and  were  not  avail- 
able for  ordinary  construction. 

Before  the  war  our  shipbuilding  was  relatively  trivial. 
In  1914  it  amounted  to  little  more  than  300,000  gross 
tons.  The  following  year  it  fell  below  a  quarter  of  a 
million  tons.  Production  for  the  United  States  Ship- 
ping Board  began  to  be  appreciable  only  after  August, 
19 1 7.  Slightly  over  200,000  gross  tons  was  delivered 
to  the  Board  in  the  last  four  months  of  191 7  and  ap- 
proximately 2,000,000  gross  tons  in  the  entire  year  1918, 
These  figures  include  thirteen  ships  of  about  70,000  gross 
tons  built  by  the  Japanese. 

Mr.  E.  N.  Hurley,  chairman  of  the  Shipping  Board, 
expected  this  country  to  have  something  more  than  13,- 
000,000  gross  tons  of  ocean-going  shipping  in  1921.  The 
country  was  getting  into  its  stride  in  shipbuilding  when 
the  war  ended.    Then  there  was  an  immediate  falling-oflf. 

In  November,  19 18,  sixty- three  ships  of  235,000  tons 
were  delivered;  in  December  forty-five  ships  of  about 
192,000  tons. 

January,  19 19,  saw  the  previous  month's  figures  cut 
in  half.  In  January  there  were  delivered  21  ships  of 
a  total  of  about  96,000  tons.  Only  fifteen  of  these  were 
steel  ships  built  in  the  United  States,  their  tonnage  being 
about  80,000  gross.  An  additional  steel  ship  was  Japa- 
nese-built, of  6,000  gross  tons.  In  August,  1918,  the 
figures  had  been  245,000  tons. 

England  can  keep  up  an  average  of  2,500,000  new 


AMERICA'S  MERCHANT  SHIPPING       293 

tons  a  year.  What  mark  is  the  United  States  going  to 
set  for  itself? 

Unless  the  business  men  of  the  country  become  pene- 
trated with  the  facts  and  bring  their  pressure  to  bear, 
there  is  danger  that  the  high  hopes  founded  on  the  splen- 
did start  which  the  United  States  made  in  1917  and 
1918  in  the  speedy  creation  of  a  great  American  mer- 
cantile marine  may  be  changed  to  bitter  disappointment. 

Mr.  Charles  Piez,  director-general  of  the  Emergency 
Fleet  Corporation,  outlined  before  the  Senate  Commerce 
Committee  in  the  latter  part  of  January  of  this  year  a 
proposal  for  reducing  the  shipbuilding  programme  which 
had  been  decided  on  in  war  time.  He  advised  the  can- 
cellation of  1,500,000  tons  of  steel  shipping  already  con- 
tracted for,  the  reduction  of  the  original  programme  of 
16,000,000  tons  to  13,000,000  and  the  annual  production 
of  2,000,000  tons,  which  is  "about  40  per  cent  of  the 
normal  capacity  of  the  existing  yards."  As  Mr.  Piez's 
figures  are  in  deadweight  tons,  his  proposal  then  would 
give  a  total  of  approximately  8,666,000  gross  tons  of 
shipping  to  the  United  States  by  an  annual  production 
henceforth  of  1,333,000  gross  tons. 

A  great  merchant  fleet,  therefore,  that  would  begin 
to  be  comparable  to  Great  Britain's  is  not  in  sight  for 
the  United  States. 


CHAPTER  XI 

EDUCATION  FOR  FOREIGN  TRADE 

British  and  German  Methods  of  Approach — Democracy 
in  Commerce — An  American  Policy  Should  Be  For- 
mulated— Training  Must  Begin  In  School — Foreign 
Trade  Is  Established  Slowly— Two  Years  To  Get  Re- 
sults, Five  To  Found  Permanent  Market. 

Neither  the  British  nor  the  Germans,  the  leaders  in 
the  winning  of  foreign  trade,  rushed  into  foreign  mar- 
kets with  the  expectation  of  easy  conquest.  They  knew 
that  to  get  and  hold  foreign  trade  of  enduring  value  they 
had  to  approach  it  in  no  overweening  spirit,  but  with 
proper  appreciation  of  all  that  was  involved  and  with 
the  disposition  to  pursue  with  system  and  method  the 
course  which  reason  and  experience  showed  must  be  fol- 
lowed. They  contemplated  it  as  a  matter  of  national  im- 
portance. 

The  German  method  of  approach  was  based  on  the 
calm  and  dignified  procedure  that  had  proved  so  success- 
ful with  the  Briton,  but  it  added  new  and  carefully 
thought  out  ways  of  assuring  success  and  on  a  great  scale. 
Usually  in  a  new  market  a  German  of  high  standing,  al- 
most of  ambassadoriaf  rank,  having  credentials  from 
his  Government,  arrived  in  the  field,  made  a  lengthy  stay 
and  dealt  openly  with  everything  but  the  question  of 
commerce  and  of  trade  penetration.    He  was  the  pioneer. 

294 


EDUCATION  FOR  FOREIGN  TRADE       295 

His  secretaries  and  assistants  were  men  picked  for  their 
ability  to  discern  and  to  judge  accurately.  He  returned 
to  Germany  and  the  results  of  his  work  and  of  his  ob- 
servations in  the  foreign  country  were  studied  and  tabu- 
lated and  then  there  went  out  an  official  business  repre- 
sentative, also  of  special  training  and  discernment,  whose 
mission  was  to  discuss  on  a  high  plane  in  the  foreign 
country  the  question  of  trade  relations  with  Germany. 
It  was  only  after  this  second  representative  returned 
home  and  his  reports  were  carefully  analysed  that  the 
actual  business  getters  were  sent  out  from  the  various 
groups  of  German  industries  to  begin  the  active  work  of 
establishing  German  trade  in  that  particular  country. 
And  they  were  no  mere  order-takers  or  travelling  sales- 
men. They  were  to  be  resident  trade  representatives,  men 
selected  to  settle  down  in  the  country,  under  contract  to 
stay  for  a  certain  number  of  years,  if  not  permanently. 

The  whole  process  was  gone  through  with  extreme  de- 
liberation and  care  and  no  attempt  was  made  by  the 
leading  industries  to  obtain  business  in  the  foreign  coun- 
try until  they  had  accurate  knowledge  of  the  nature  and 
precise  form  of  the  products  which  the  foreign  country 
desired  and  until  they  had  actually  made  up  the  special 
lines  of  goods  and  had  satisfied  themselves,  not  only  re- 
garding costs  and  prices  to  be  obtained,  but  also  regard- 
ing the  desirability  of  their  devoting  part  of  their  manu- 
facturing resources  to  that  particular  line  and  for  that 
particular  country,  rather  than  to  other  lines  or  for  other 
countries.  The  political  side  of  the  question  was  consid- 
ered with  no  less  care  than  the  economic  and  social  sides. 

All  the  German  manufacturers  were  imbued  with  the 
importance  of  not  making  a  false  start.  They  planned 
slowly  and  prudently;  they  studied  everything  pertain- 


296  AMERICA  IN  WORLD  MARKETS 

ing  to  their  subject  and  they  became  amazingly  familiar 
with  all  its  details.  They  were  able  to  show  the  foreigner 
at  every  point  that  they  knew  more  than  he,  that  they 
could  always  teach  him  something ;  they  had  foreseen  his 
special  problems  and  had  prepared  solutions  for  them. 
Permanency  was  a  prime  consideration. 

The  whole  German  business  world  was  taught  to  con- 
centrate its  attention  on  the  importance,  in  the  national 
interest,  of  winning  foreign  trade.  Legislation  and  busi- 
ness policies  were  shaped  for  the  purpose. 

The  British,  the  French  and  the  Germans  have  had 
their  characteristic  way  of  envisaging  foreign  trade. 
American  manufacturers  can  now  enter  with  their  own 
special  attitude.  They  can  emphasise  it  by  proclaiming 
their  democratic  ideals  and  their  fundamental  principles 
of  fair  play,  of  co-operation  and  of  service  with  respect 
to  those  with  whom  they  deal,  so  that  the  idea  may  be 
conveyed  that  their  aim  is  not  for  one-sided  gain  but  for 
mutual  profit.  The  American  ideal,  it  is  to  be  hoped,  will 
be  that  indicated  by  the  purpose  to  uphold  democracy  in 
trade  and  commerce,  to  repudiate  the  doctrines  of  com- 
mercial rivalry  and  ungenerous  competition  and  to  dis- 
avow any  desire  for  conquest  or  for  the  conducting  of 
economic  war  or  anything  that  might  by  any  stretch  of 
the  imagination  be  described  as  'warfare"  in  trade. 

Democracy  in  commerce,  as  a  distinguished  American 
economist  has  said,  would  prompt  us  to  recognise  the 
rights  of  our  foreign  competitors  and  to  seek  the  welfare 
of  those  with  whom  we  trade,  in  order  that  we  may  con- 
tinue to  share  in  a  welfare  to  which  we  contribute;  mu- 
tual good  will  inevitably  follows  and  where  good  will' 
exists  war  is  impossible.  Democracy  in  commerce  pre- 
scribes the  continual  exercise  of  what  has  been  called  The 


EDUCATION  FOR  FOREIGN  TRADE       297 

Golden  Rule  of  Business.  Naturally,  account  must  be 
taken  of  the  measures  adopted  with  regard  to  foreign 
trade  by  other  countries.  There  must  be  organisation 
to  meet  organisation  and,  as  far  as  possible,  government 
support  to  meet  government  support.  We  must  meet 
foreign  competition,  that  competition  which  is  the  life 
of  trade,  and  America  then  will  have  the  privilege  of 
setting  the  example  in  competition,  of  the  constructive 
and  not  of  the  destructive  and  fiercely  combative  kind. 

The  United  States  has  the  wonderful  opportunity  of 
taking  the  lead  in  shaping  the  methods  of  carrying  out 
trade  nationally  and  internationally.  It  has  the  oppor- 
tunity of  promoting  commerce  that  will  lead  to  peace  and 
of  forever  discrediting  the  commercial  methods  that  have 
led  to  war  and,  instead  of  struggling  for  monopolistic 
control  and  domination,  as  the  Germans  had  done,  this 
country  can  establish  international  good  will  that  shall 
include  all  who  are  willing  to  participate  in  commerce  in 
an  upright  and  honourable  way. 

American  manufacturers  must  get  together  if  they 
are  to  win  foreign  trade  in  a  big  way  and  in  fairly  rapid 
fashion.  Competent,  experienced  leaders  for  groups  of 
industries  would  be  an  advantage  of  the  first  magnitude. 

A  definite  foreign  trade  policy  should  be  established. 
Measures  should  be  decided  on  for  dealing  with  those 
who  violate  it  and  who  thus  detract  from  the  good  re- 
pute of  American  industry  and  commerce.  Foreign 
trade  agents  should  be  selected,  well-paid  experts,  and 
the  American  manufacturers  should  not  enter  the  foreign 
field  until  fully  equipped,  after  proper  study,  with  right 
products  at  right  prices  and  with  the  feeling  that  they 
are  entering  foreign  trade  not  as  a  side  line,  but  as  a 
vital  feature  of  their  business. 


298  AMERICA  IN  WORLD  MARKETS 

A  resolution  was  adopted  at  the  Atlantic  City  busi- 
ness congress  calling  on  industrialists  and  Government 
to  promote  education  for  foreign  trade.  "In  the  larger 
opportunities  which  are  to  be  opened  to  American  busi- 
ness men  to  play  a  part  in  the  international  commerce 
of  the  world,"  it  stated,  "the  need  will  be  felt  for  more 
men  who  are  trained  to  a  knowledge  and  understanding 
of  the  language,  the  business  methods  and  the  habits  of 
thought  of  foreign  lands.  Complete  success  can  only 
come  to  those  who  succeed  in  putting  themselves  into 
full  accord  and  sympathy  with  the  peoples  with  whom 
they  are  to  deal. 

"We  urge  upon  our  industrials  that  they  take  steps 
to  provide  opportunities  to  young  men  to  obtain  an  edu- 
cation in  the  practices  of  overseas  commerce  and  finance 
and  in  the  practical  uses  of  foreign  languages. 

"We  call  the  attention  of  the  various  departments  of 
Government  and  the  attention  of  educators  to  the  im- 
portance of  this  matter  and  ask  that  special  efforts  be 
made  to  supplement  the  valuable  work  already  done  and 
to  open  up  every  facility  to  the  furtherance  of  a  success- 
ful prosecution  of  this  educational  work." 

As  already  stated,  it  would  be  idle  for  them  to  think 
of  going  after  foreign  trade  by  sending  out  a  salesman 
with  a  bag  for  a  few  weeks'  tour.  One  of  the  authori- 
ties of  the  Standard  Oil  Company,  who  had  much  ex- 
perience in  directing  men  abroad  and  who  can  speak  with 
some  weight  on  the  way  in  which  men  should  be 
trained  for  foreign  trade,  has  said :  "We  must  go  back 
of  the  college  and  into  the  high  school,  and  there  sow 
the  seeds  of  at  least  complacent  endurance  of  the  idea 
of  emigration  to  foreign  countries  to  carry  on  America's 
foreign  trade." 


EDUCATION  FOR  FOREIGN  TRADE       ^99 

Mr.  E.  M.  Herr,  president  of  the  Westinghouse  Elec- 
tric and  Manufacturing  Company,  has  stated  in  this  con- 
nection : 

"Before  the  war  we  did  a  comparatively  small  part  of 
the  business  of  furnishing  foreign  countries  electrical 
machinery,  but  we  will  not  keep  even  this  small  part  of 
the  business  long — though  we  should  succeed  in  secur- 
ing a  g^eat  many  orders  while  Europe  is  prostrated — 
unless  we  invest  our  money  there,  arrange  ample  credit 
facilities,  and  send  our  well-trained  young  men  to  those 
lands,  not  to  make  a  business  trip  or  excursion,  however 
complete  or  extended,  but  to  settle  down  and  make  their 
homes  in  such  countries,  learning  the  needs  and  tastes  of 
the  people,  not  by  casual  observation  but  by  intimate, 
friendly,  long-continued  personal,  sympathetic  contact. 

"In  addition  to  adapting  our  goods  to  export  require- 
ments, we  must  arrange  to  give  service  in  this  trade  at 
least  as  good  as  in  our  domestic  market.  We  should 
never  forget  in  any  industrial  business  that  we  are  selling 
service  as  well  as  product,  and  that,  however  good  the 
quality  of  one's  product,  if  the  material  does  not  come 
when  needed,  is  not  packed  properly,  or  in  any  other 
way  our  service  to  the  customer  is  unsatisfactory,  the 
transaction  fails  to  tend  to  tie  him  to  the  producer  and 
permits  a  competitor  to  obtain  a  foothold  not  otherwise 
possible.  These  are  ordinary  principles  of  business,  but 
apply  with  unusual  force  when  we  are  dealing  with  a 
customer  in  a  foreign  land." 

As  a  guide  to  American  manufacturers  contemplat- 
ing entry  into  foreign  markets,  and  as  an  aid  in  provid- 
ing equipment  for  foreign  trade,  Mr.  B.  S.  Cutler,  Chief 
of  the  Bureau  of  Foreign  and  Domestic  Commerce  of 
the  Department  of  Commerce,  advocates  the  establish- 


300         AMERICA  IN  WORLD  MARKETS 

ment  of  a  Bureau  of  Industrial  Practice  with  the  follow- 
ing subdivisions : 

1.  A  Division  of  Shop  Practice.  Machinery  and  arti- 
san methods  here  and  abroad  can  be  studied,  measured, 
compared  and  published  to  the  infinite  advantage  of  shop 
executives,  since  most  of  us  never  progress  beyond  the 
limit  of  our  own  originality. 

2.  A  Division  of  Material  Valuation.  The  original 
sources,  the  handling  and  grades  of  foreign  and  domestic 
materials  are  seldom  thoroughly  understood  by  the  user ; 
often  he  buys  in  a  rising  market  at  prices  made  up  he 
knows  not  how,  although  he  may  have  bargained  hard. 
Neither  does  he  know  the  available  stocks. 

3.  A  Division  of  Information  on  International  Water 
and  Railways.  A  traffic  adviser  to  commerce  and  for 
commerce,  an  advocate  in  favour  of  proper  trade  routes 
could  render  great  service. 

4.  A  Division  of  Distribution  Economy.  The  devel- 
opment of  sensible  delivery  methods  would  cut  down 
overhead  expense  to  a  substantial  extent. 

5.  A  Division  of  Cost  Finding  Methods.  This  has  al- 
ready been  done  in  a  degree  for  some  purchasing  offices. 

The  head  of  the  foreign  department  of  one  of  the  great 
American  manufacturing  corporations  with  an  estab- 
lished foreign  business  in  every  important  country 
around  the  globe,  a  man  of  unusual  personal  experience 
in  foreign  trade,  would  like  to  impress  on  American  man- 
ufacturers generally  that  foreign  markets  are  not  won 
easily  or  rapidly.  It  takes  two  years,  he  affirms,  to  begin 
to  get  results  and  five  years  to  have  an  established  trade, 
that  is  presupposing  that  the  manufacturer  has  proceeded 
in  accordance  with  the  very  best  practice,  with  ripe 
knowledge  and  the  utmost  care. 


EDUCATION  FOR  FOREIGN  TRADE       301 

If  Americans  are  to  create  a  great  permanent  foreign 
trade,  they  must  set  themselves  to  the  creation  of  new 
markets.  They  must  look  over  the  undeveloped  areas  of 
the  world,  discover  their  resources  and  opportunities  and 
contemplate  the  creation  of  transportation  facilities  and 
the  financing  in  an  important  way  of  the  areas  or  special 
commercial  developments  they  propose  to  exploit.  They 
will  have  to  count  on  investing  capital,  granting  credits, 
accepting  and  carrying  foreign  bonds  and  securities. 

Direct  participation  by  governments  in  the  purchase 
and  sale  of  staples  and  manufacturing  materials  and  in 
the  development  of  industry  and  commerce;  the  estab- 
lishment of  international  credits  for  this  purpose  and  in 
substitution  for  ordinary  commercial  credits,  must 
powerfully  affect  the  heretofore  established  methods  of 
foreign  trade  and  create  a  condition  that  will  take  time 
to  work  out,  even  on  the  part  of  governments  and  bank- 
ing systems.  For  the  ordinary  business  firm  it  will  in- 
volve many  questions  for  the  solving  of  which  there  is 
no  positive  authoritative  source  of  information  to  which 
they  can  have  recourse. 

Under  the  new  conditions  education  for  foreign  trade 
will  be  a  more  essential  preliminary  than  ever  for  the 
establishment  of  a  great  permanent  foreign  commerce. 
Education  of  the  kind  cannot  be  expected  to  be  quickly 
acquired,  especially  as  American  industry  may  be  re- 
garded as  entering  only  the  first  grade  of  the  curricidum. 


CHAPTER  XII 

OUR  NEW  OBLIGATIONS  TO  THE  WORLD 

Duties  That  Accompany  America's  Financial  and  Com- 
mercial Supremacy — Warnings  Against  One-Sided 
Trading — America  Must  Supply  Food,  Materials  and 
Credit — Will  Be  Expected  to  Invest  in  Foreign  Se- 
curities— Problems  of  Relations  with  Other  Peoples 
— Business  Men  the  Natural  Leaders  in  Difficult 
Times. 

This  country  did  not  go  out  seeking  supremacy,  com- 
mercial and  financial.  It  had  this  supremacy  thrust  upon 
it. 

Our  commercial  and  financial  greatness,  however,  has 
brought  with  it  duties  and  obligations  which  a  power- 
ful nation  animated  by  high  ideals  cannot  overlook.  And 
although  they  are  of  a  moral  order,  to  neglect  them 
would  subject  our  people  to  penalties  of  a  very  practical 
kind.  Thus  it  is  imperative  that  Americans  shall  not  be 
grasping  in  dealing  with  other  peoples,  that  they  shall 
be  fair  and  serviceable  in  trade,  that  out  of  their  bounty 
they  shall  contribute  to  alleviate  the  sufferings  of  other 
peoples  with  a  lavish  hand  and  a  generosity  worthy  of« 
a  great  people  in  the  time  of  its  greatest  prosperity. 

Mr.  William  B.  Colver,  Chairman  of  the  Federal 
Trade  Commission,  has  said  that  any  programme  for 
the  United  States  in  the  new  era  "looking  to  the  build- 
ing on  top  of  the  present  credit  balances  unending  moun- 

302 


OUR  NEW  OBLIGATIONS  TO  THE  WORLD   B03 

tains  of  international  credits  will  tend,  not  only  to  make 
the  United  States  the  most  hated  nation  in  the  world, 
but  to  mark  her  for  destruction.  It  means  commercial 
imperialism." 

Secretary  Redfield  has  deprecated  any  hurried  rush 
for  foreign  trade.  "I  do  not  think,"  he  said,  "that  this 
is  the  hour  for  America  as  a  nation  to  boom  great,  ag- 
gressive conquests  in  the  economic  world  abroad. 

"It  seems  to  me  that  if  to  the  $8,000,000,000  due  us, 
which  is  certain  to  be  $10,000,000,000,  if  to  this  is  to 
be  added  the  credits  necessary  to  spread  an  intensive 
and  worldwide  rush  for  all  the  trade  we  can  get,  we 
would  be  piling  credit  on  credit,  balance  on  balance,  and 
run  a  certain  danger  lest,  adding  to  the  debts  due  us  on 
one  side,  we  take  away  in  some  measure  the  earning 
power  of  those  people  to  whom  we  must  look  to  pay  us 
what  they  owe  us  now  and  what  they  are  to  owe. 

"We  have  a  great  problem,  the  problem  of  supplying 
the  world  food  and  equipment  in  a  very  large  degree  and 
to  furnish  the  credit  with  which  they  must  pay  us.  In 
what  form  it  will  be  done  I  am  not  sure,  but  I  hope  it 
will  very  largely  take  the  form  of  our  investing  as  indi- 
viduals and  associated  organisations  of  one  kind  or  an- 
other in  the  securities  from  abroad  which  will  be  offered 
us  here. 

"If  we  do  not  extend  our  acceptance  in  this  way,  then 
France  and  Belgium  and  Italy  and  Serbia  and  Poland 
must  go  without  food,  materials  and  equipment  to  re- 
store their  life.  It  seems  to  me  that  just  as  a  common 
sense  American  aids  a  debtor  who  has  ample  assets  if 
given  a  helping  hand,  it  is  now  the  merest  common  sense 
to  extend  the  helping  hand  of  business  to  those  coun- 
tries." 


304  AMERICA  IN  WORLD  MARKETS 

Mr.  Paul  M.  Warburg,  formerly  of  the  Federal  Re- 
serve Board,  said  in  his  address  at  the  Atlantic  City  Con- 
gress of  business:  "In  the  war  we  have  made  common 
cause  with  the  Allies.  We  should  likewise  make  common 
cause  with  them  in  seeking  the  solution  of  the  immedi- 
ate problems  of  reconstruction  which  they  face  because 
of  the  efforts  they  put  forth  in  the  war.  These  problems 
peculiarly  depend  for  their  solution  upon  commerce. 
Raw  materials  and  industrial  equipment  which  we  pos- 
sess the  Allies  urgently  require,  that  they  may  reconsti- 
tute their  economic  life.  We  should  deal  generously 
with  them  in  sharing  their  resources. 

"In  order  that  we  may  share  our  materials  with  the 
Allies,  we  must  also  provide  them  with  credits  through 
which  they  may  make  the  necessary  payments. 

"As  I  see  it,  our  future  economic  position  will  be  of 
such  strength  that  it  will  be  difficult  for  many  countries 
to  keep  their  exchanges  at  par  with  us.  They  are  not 
likely  to  have  sufficient  quantities  of  the  goods  required 
by  us,  nor  will  they  have  large  amounts  of  gold  to  spare, 
and  therefore,  in  payment  of  the  things  we  sell  them  and 
of  the  interest  they  will  have  to  pay  us,  they  will  have 
to  try  and  find  something  else  than  goods  that  we  may 
purchase  from  them ;  that  is,  they  will  offer  us  the  indi- 
vidual or  collective  obligations  of  their  nationals,  or  their 
industrial  enterprises,  or  such  securities  or  assets  of  other 
countries  as  they  control.  If  we  want  these  countries 
to  continue  to  be  able  to  buy  our  goods,  it  is  therefore 
incumbent  upon  us  to  prepare  ourselves  to  grant  these 
foreign  credits  and  to  buy  and  assimilate  these  foreign 
assets." 

That  America's  manufacturers  and  merchants  are  fully 
alive  to  the  condition  and  spontaneously  willing  and 


OUR  NEW  OBLIGATIONS  TO  THE  WORLD     305 

eager  to  play  a  noble  and  generous  part  was  shown  by 
the  resolution  on  "international  reconstruction"  which 
was  voted  at  the  Atlantic  City  congress. 

"In  war,"  it  said,  "we  have  made  common  cause  with 
the  Allies.  We  should  likewise  make  common  cause 
with  them  in  seeking  the  solution  of  the  immediate  prob- 
lems of  reconstruction  which  they  face,  because  of  the 
efforts  they  put  forth  in  the  war.  These  problems  pecu- 
liarly depend  for  their  solution  upon  commerce. 

"Raw  materials  and  industrial  equipment  which  we 
possess  the  Allies  urgently  require,  that  they  may  recon- 
stitute their  economic  life.  We  should  deal  generously 
with  them  in  sharing  these  resources. 

"In  order  that  we  may  share  our  materials  with  the 
Allies,  we  must  also  provide  them  with  credits  through 
which  they  may  make  the  necessary  payments. 

"Our  ocean  tonnage  must  supply  our  troops  overseas 
and  help  to  provision  the  inhabitants  of  war-devastated 
regions.  The  part  of  our  ocean  tonnage  not  required  for 
these  paramount  needs,  and  vessels  of  associated  coun- 
tries which  are  in  a  similar  situation,  should  be  entered 
into  the  common  service  of  all  nations.  This  common 
service  should  secure  to  all  nations  their  immediate  needs 
of  food,  raw  materials,  and  transport  for  their  products." 

Nations  have  become  powerful  under  two  kinds  of 
leadership,  that  of  the  great  captains  in  the  field  and  that 
of  the  great  commercial  men  of  enterprise.  The  seed  of 
the  Alexanders,  Caesars,  Napoleons  has  perished.  The 
great  figures  in  industry  are  the  only  world  conquerors 
of  our  time  and  in  the  future.  To  the  enterprise  and 
energy  of  business  men  we  owe  our  great  modern  prog- 
ress. To  them  by  rightful  title  belongs  leadership  in  the 
amelioration  of  world  conditions. 


PART  IV 
AN  ALTERNATIVE  FOR  FOREIGN  TRADE 

CHAPTER  I 

DEVELOPMENT  OF  THE  HOME  LAND 

A  Rare  Opportunity  Offers — Replace  the  War  Urge 
by  a  Peace  Urge — Scheme  of  "Beautiful  America" 
— Problems  of  the  Hour  .Would  Vanish — How 
United  People  Can  Work  for  General  Betterment^ — 
All  Humanity  Would  in  This  Way  Be  Benefited. 

This  country  is  great  and  prosperous  as  no  country 
ever  was  before.  It  is  eager  to  do  great  things.  Its  eyes 
are  scrutinising  the  horizon  for  opportunities.  The  whole 
world  is  being  searched  for  them.  And  yet  here  at  home 
is  an  opportunity  of  the  most  grandiose  kind,  worthy  of 
the  noblest  efforts  of  the  greatest  and  richest  people  in 
the  world. 

Our  sudden  growth  of  prosperity  has  brought  with  it 
a  huge  problem.  We  have  factories,  machinery,  labor, 
money,  raw  materials — all  that  is  needed  for  vast  indus- 
trial production  far  greater  than  our  country  can  at  pres- 
ent absorb.  To  reduce  in  any  great  degree  the  high  pitch 
of  production  which  the  war  has  evoked  would  be  calam- 
itous. We  cannot  think  of  slipping  back,  of  letting  wages 
go  down,  fires  go  out,  wheels  stop;  of  seeing  the  park 
benches  filled  with  the  unemployed ;  poverty,  misery,  and 

306 


DEVELOPMENT  OF  THE  HOME  LAND  SOT 

suffering  rife;  rust  and  cobwebs  on  the  tools  of  indus- 
try; the  wind  blowing  through  broken  panes  into  fac- 
tories cold  and  dark,  the  fine  burst  of  war-time  energy 
and  enthusiasm  extinguished ;  men  growing  stale ;  Bolshe- 
vism creeping  upon  us.  This  cannot  be,  we  say.  The  fine 
fire  and  vigor  is  still  with  us.     We  shall  find  a  way. 

Let  us  not  deceive  ourselves.  If  we  do  not  find  a 
way,  and  fairly  soon,  v^^e  shall  certainly  begin  to  sink 
back,  slowly,  gradually  at  first,  but  the  decline  to  dulness 
is  made  with  increasing  speed. 

The  way  that  most  of  us  now  have  in  sight  is  the  for- 
eign market.  If  home  demand  does  not  take  all  of  our 
production,  there  is  nothing  left  but  to  take  the  surplus 
abroad.  There  we  can  create  a  new  trade  that  will  take 
care  of  all  our  increased  productive  capacity  and  guaran- 
tee us  ever  new  industrial  growth  and  expansion. 

Let  us  hope  it  will.  Nothing  can  be  more  valuable  to 
us,  going  out  to  conquer,  than  the  conviction  that  we  are 
certain  to  win.  But,  once  more,  let  us  not  needlessly 
incur  the  risk  of  deception. 

The  war  has  changed  many  things,  foreign  markets  in- 
cluded. We  are  the  great  creditor  nation ;  we  cannot  be 
sure  that  the  others  will  be  willing  to  go  on  running  into 
debt  to  us.  The  foreigner  may  not  need  the  things  we 
would  most  like  to  sell;  he  may  not  have  the  money  to 
pay  for  them ;  we  may  not  be  inclined  to  accept  the  wares 
he  would  offer  in  exchange  for  ours.  There  may  be 
competitors  in  the  foreign  market,  selling  more  cheaply 
than  we,  having  better  banking  arrangements,  or  allow- 
ing better  credit  terms.  Besides,  to  get  into  a  foreign 
market  takes  time — two  years,  we  learn,  before  one  can 
legitimately  hope  for  a  show  of  results;  five  years  be- 
fore one  really  gets  going. 


308  AMERICA  IN  WORLD  MARKETS 

Yes,  but  we  shall  do  the  thing  in  a  new  way  and  with 
a  war-time  rush.  The  world's  stock  of  goods  is  depleted ; 
we  have  the  goods,  we  have  our  new  ships,  we  have  our 
foreign  banks ;  we  shall  get  the  business.  Let  us  fervently 
hope  so,  although  the  expert,  the  man  who  has  had  experi- 
ence, will  keep  on  affirming  "It  takes  time,"  and  although, 
as  indicated  elsewhere,  our  notion  about  new  ships  was 
not  altogether  exact.  The  new  ships  will  not  be  there  in 
the  quality  or  in  the  volume  most  of  us  had  expected. 

Let  us  not  by  any  means  overlook  the  foreign  market. 
Let  us  hope  and  believe  that  it  may  quickly  prove  to  be 
at  least  part  of  the  new  outlets  we  need. 

But  if  we  count  on  the  foreign  market  as  our  only 
hope,  and  for  one  reason  or  another  it  should  fail  us, 
if  there  should  be  some  hitch,  what  then? 

Is  there  not  some  alternative  for  the  foreign  market? 
Let  us  see. 

We  have  seen  the  urge  of  war,  the  wonderful  national 
spasm  of  effort  that  can  concentrate  all  energies  on  the 
accomplishment  of  a  determined  end,  when  that  end  is  a 
great  one.  Can  we  not  stir  up  a  peace  urge,  with  an 
end  that  merits  the  piling  together  of  all  our  national 
energies  and  the  directing  of  them  at  its  fulfilment? 

What  greater  aim  could  a  people  set  before  itself  than 
to  make  its  country  beautiful,  to  make  it  a  model  and 
ideal  land  to  live  in  where  all  things  worth  while  in  life 
are  made  available  to  all,  where  comfort  and  well-being 
are  made  general,  where  all  are  made  happy  ?  Could  not 
this  aim  serve  to  inspire  the  great  peace  urge?  If  it 
could,  then  we  should  have  no  absolute  need  of  the  for- 
eign market.  From  the  merely  economic  point  of  view 
we  should  have  something  far  superior. 

War,  the  killing  of  men,  the  devastation  of  countries, 


DEVELOPMENT  OF  THE  HOME  LAND     309 

the  desolation  of  homes,  the  reversion  to  savagery,  can 
perhaps  be  best  compensated  for  by  a  great  combined  im- 
mediate striving,  not  merely  for  a  quick  return  to  the 
ways  of  civilisation  and  progress,  but  for  an  intensifica- 
tion of  them  such  as  had  never  before  been  seen,  for  the 
reaching  in  one  grand  bound  of  the  goal  towards  which 
we  have  been  heading  slowly,  with  gains  and  with  set- 
backs, with  no  assured  confidence  of  final  success. 

There  is  a  chance  now  that  may  not  come  again. 
America  is  rich.  Never  before  has  it  been  so  rich,  so 
prosperous,  so  self-confident,  so  conscious  of  its  own 
giant  strength,  so  tingling  with  vitality  and  energy.  It 
may  not  again  for  many  a  long  day  be  in  such  splendid 
shape  for  the  undertaking  of  a  great  concerted  enterprise. 

The  urge  of  war,  for  its  best  handling,  is  supposed  to 
call  for  a  great  leader.  The  thought  may  arise  that  a 
peace  urge  would  be  impossible  without  an  eminent  cap- 
tain to  summon  forth  the  whole  people,  to  arouse  their 
enthusiasm,  to  inspire  a  spirit  of  eager  desire  for  action, 
to  show  the  way  and  to  carry  them  along  irresistibly  and 
with  ever  increasing  zeal  for  the  end  in  sight. 

But  even  if  a  great  chief  is  lacking,  the  start  could  well 
be  made.  The  leader,  if  he  was  imperatively  necessary, 
would  crop  up  with  the  progress  of  the  movement. 
American  business  men,  organised  in  groups  or  in  a  body, 
could  undertake  the  leadership.  To  them  really  it  be- 
longs to  work  out  plans,  to  determine  the  form  of  co- 
operation which  is  to  be  demanded  from  all  the  units 
and  elements  of  the  community.  And,  be  it  noted,  it  is 
not  generosity  and  sacrifice  that  really  are  called  for. 
Nobility  of  thought  and  generosity  of  ideals  here  find 
themselves  attended  with  intelligent  self-interest. 

Eighteen  months  of  war  showed  the  way  in  which  an 


SIO         AMERICA  IN  WORLD  MARKETS 

organisation  for  this  purpose  can  be  created  on  a  prac- 
tical basis.  The  War  Industries  Board  had  more  than 
two  score  sections  which  directed  the  main  groups  of 
industries  in  the  war  urge.  The  Conservation  Division 
of  the  Board  called  in  hundreds  of  separate  industries — 
not  to  direct  them,  but  to  learn  from  them  how  they 
should  best  direct  themselves  for  co-operation  in  the  great 
combined  war  effort,  and  to  make  it  mandatory  for  the 
industries  to  carry  out  tlie  plans  they  themselves  had 
proposed.  Mr,  A.  W.  Shaw,  Chief  of  that  Division,  con- 
siders the  peace  effort  here  proposed  not  only  desirable 
but  entirely  feasible. 

The  organised  industries  could  undertake  to  beautify 
the  cities  and  towns,  to  lay  out  and  improve  parks  to 
build  roads,  to  develop  communications  and  transporta- 
tion, to  wipe  out  unsightly  and  unhealthy  tenements  and 
replace  them  with  comfortable  and  attractive  dwelling 
places,  to  erect  public  buildings  that  would  elevate  the 
mind  and  inspire  civic  pride.  Other  organisations  could 
lay  the  plans  for  the  education  of  youth  and  for  the 
mental,  spiritual  and  aesthetic  development  of  the  whole 
community,  for  the  conservation  and  improvement  of 
health,  for  sports  and  diversions  of  every  desirable  kind. 

New  outlets  for  products  would  thus  be  created  and 
business  would  boom  in  a  way  we  have  not  yet  wit- 
nessed. 

Secretary  Lane's  undertaking  for  the  reclamation  of 
waste  lands — swamps,  arid  land,  cut-over  land — while 
primarily  conceived  for  the  purpose  of  providing  imme- 
diate work  and  eventually  homes  for  returning  soldiers, 
would  fit  in  admirably  as  a  part  of  this  enterprise.  Mr. 
Lane's  proposal  to  pay  the  returned  soldiers,  and  such 
other  workingmen  as  joined  in  the  enterprise,  for  their 


DEVELOPMENT   OF  THE   HOME  LAND       311 

work  in  reclaiming  the  land  under  the  direction  of  ex- 
pert engineers,  for  the  work  done  while  learning  to  farm 
it  under  direction  of  the  Department  of  Agriculture  ex- 
perts, for  their  work  in  building  the  community  centres 
which  they  are  ultimately  to  occupy,  and  in  learning  me- 
chanical trades  against  the  day  when  their  community 
centres  shall  have  become  hives  of  industry,  and  then 
to  deed  over  to  each  soldier  or  civilian  worker  a  sec- 
tion of  land,  with  farming  implements  and  equipment, 
and  a  dwelling  in  the  community  centre,  on  an  easy  long- 
term  payment  plan,  is  economically  sound  and  is  a  wholly 
justifiable  use  of  public  funds  since  it  assures  a  hundred- 
fold return  to  the  nation  of  the  moneys  it  advances,  as 
well  as  benefits  and  services  of  many  kinds  which  cannot 
be  calculated  in  mere  terms  of  wealth.  It  might  well 
serve  as  a  model  for  other  features  of  the  broad  scheme 
here  under  consideration. 

Cities,  towns  and  community  centres  of  all  kinds  would 
inevitably  be  intensely  interested  in  the  scheme,  once  it 
was  set  vividly  before  them.  The  emulation  which  we 
witnessed  between  cities  and  towns — in  service  flags,  in 
"going  over  the  top"  in  Liberty  Bond  sales  and  War 
Savings  Stamp  sales — would  be  duplicated  in  this  "Beau- 
tiful America"  project  and  would  be  a  stimulating  in- 
fluence in  getting  the  most  desirable  results. 

During  the  war  there  grew  into  popularity  the  inter- 
esting practice  of  holding  Block  Parties.  On  a  certain 
day  a  given  city  block  was  decorated  with  American  flags 
and  banners  of  all  the  original  nationalities  of  those  resid- 
ing in  the  block,  a  large  service  flag  showing  by  its  stars 
the  number  of  men  the  block  contributed  to  the  military 
forces  of  the  country  and  each  house  displaying  conspic- 
uously the  service  flag  of  those  who  dwelt  in  it.    At  night 


312  AMERICA  IN  WORLD  MARKETS 

the  block  was  gayly  illuminated,  a  band  or  orchestra 
played  while  scores  of  couples  danced  on  the  street.  An 
interesting  fact  is  that  even  in  the  humblest  districts  all 
rubbish  was  cleared  away ;  windows  were  washed ; 
houses,  railings  and  areas  were  cleaned  and  brightened 
up,  and  the  street  itself  was  scrubbed  for  the  occasion 
to  serve  as  a  dancing  fioor.  The  inhabitants  donned 
their  best  clothes  and  there  prevailed  for  the  time  being 
a  general  sentiment  of  good  fellowship.  The  war  had 
engendered  "Block  pride."  Furthermore,  there  was  a 
notable  emulation  between  the  various  blocks  to  outdo 
one  another  in  making  their  block  the  most  attractive 
and  in  holding  the  most  successful  Block  Party. 

The  Block  movement  had  hardly  got  well  started  when 
the  armistice  was  signed,  but  even  in  the  brief  period 
during  which  it  lasted,  it  showed  a  notable  evolution  and 
it  would  have  been  interesting  to  be  able  to  see  how  far, 
and  in  what  way,  it  would  have  developed  if  it  had  con- 
tinued in  existence. 

Here  was  a  movement  that  came  about  without  lead- 
ership, that  started  spontaneously  from  the  people  them- 
selves. It  is  easy  to  imagine  how,  under  broad  organi- 
sation, it  might  have  been  turned  to  account  as  an  im- 
portant factor  in  the  war  effort.  For  a  great  peace 
effort,  such  as  that  here  proposed,  block  organisations 
and  others  representing  subdivisions  of  the  population, 
are  manifest  opportunities  of  the  greatest  promise. 

This  country  does  not  need  wealth.  It  has  more  now 
than  it  could  reasonably  have  hoped  to  have  a  generation 
from  now  in  the  normal  development  of  peace.  This 
country  grew  great  by  its  domestic  industry  and  com- 
merce. It  now  needs  more  commerce.  It  needs  work 
for  its  new  factories  to  give  returns  to  invested  wealth. 


DEVELOPMENT  OF  THE  HOME  LAND       313 

to  keep  workers  employed,  to  hold  wages  high,  to  main- 
tain good  living  conditions,  and  to  continue  the  pros- 
perity and  welfare  of  the  nation.  Whether  that  increased 
commerce  is  foreign  or  domestic  may  not  seem  to  matter 
greatly,  as  long  as  it  is  forthcoming.  As  a  matter  of 
fact  there  will  be  a  distinct  advantage  if  an  appreciable 
part  of  it  is  domestic.  Let  us  not  be  misled  by  sophis- 
tries about  the  superior  boon  of  foreign  trade. 

The  industries  that  are  now  prosperous  and  are  bloated 
with  a  capacity  for  production  would  be  making  the  most 
precious  kind  of  an  investment  in  helping  to  develop  their 
country  in  the  way  outlined,  in  creating  new  markets 
for  themselves.  They  have  to  make  investments  to  get 
foreign  markets.  They  have  to  put  out  funds  in  order 
to  obtain  foreign  orders;  they  have  to  put  money  into 
the  manufacturing  of  goods  for  the  foreigner;  they  have 
to  sell  their  goods  to  the  foreigner  on  credit.  Thus  they 
have  to  work  for  the  foreigner  and  to  finance  him  before 
they  can  reap  profit  from  him,  and  they  are  benefited 
themselves  only  after  they  have  benefited  him.  How 
much  less  precarious  and  how  much  more  beneficial  to 
themselves  will  be  their  investment  in  their  own  country 
which  is  blessed  in  superabundance  with  natural  re- 
sources that  make  it  almost  independent  of  the  outside, 
quite  differently  from  the  foreign  country  which  must 
give  and  take  in  order  to  prosper  and  where  a  shift  in 
the  balance  of  exchange  of  products  may  affect  its  own 
prosperity  and  that  also  of  the  nations  with  which  it 
trades.  How  much  more  secure  and  reliable  is  American 
domestic  trade  and  what  a  benefit  to  America  to  have 
it  constantly  expanded. 

The  great  prosperity  which  the  war  effort  brought  to 
the  United  States  would  be  nothing  compared  to  the 


814.  AMERICA  IN  WORLD  MARKETS 

prosperity  which  this  peace  effort  would  bring.  The  war 
effort  prosperity  came  through  the  production  of  things 
that  were  made  merely  to  be  destroyed,  to  be  blown  to 
atoms  or  to  be  worn  out  in  a  very  brief  time.  Pros- 
perity from  this  peace  effort  would  be  based  on  the  pro- 
duction of  things  that  endure  and  that  guarantee  a  con- 
tinuance of  demand.  The  war  work  was  for  abroad  and 
was  but  temporary.  The  prosperity  that  comes  from 
work  done  for  a  home  country  such  as  ours  does  not 
end  with  the  immediate  effort;  it  increases  in  geometric 
progression  with  continuous  systematic  work. 

America's  commercial  greatness,  as  has  been  said,  was 
established  through  the  home  market.  The  market  was 
here  and  it  kept  growing  in  its  demands  and  requirements. 
But  little  effort  had  to  be  made  for  its  cultivation.  It 
was  the  tilling  of  a  rich  virgin  field.  The  time  has  now 
come  for  intensive  scientific  cultivation  of  it.  The  op- 
portunity is  here;  it  is  boundless,  practically  unlimited. 
And  no  mere  dream  of  fortune  is  this,  but  the  reasoned 
practical  demonstrations  of  common  sense. 

Every  single  industry,  profession  and  line  of  trade  is 
interested  in  pushing  the  plan  with  every  ounce  of  their 
energy,  for  every  one  of  them  will  be  the  gainer  by  it,  as 
they  could  be  gainers  in  no  other  way. 

The  workers  of  the  Nation  are  no  less  vitally  inter- 
ested in  throwing  themselves  into  the  movement  in  the 
heartiest  way,  since  it  involves  for  them  better  times, 
superior  living  conditions,  recognition  of  their  true  status 
in  the  industrial  life  of  their  country,  the  stimulation 
of  their  efforts  to  elevate  their  position,  the  assurance 
of  the  best  that  life  offers  for  their  children,  the  coming 
of  those  very  conditions  for  bringing  about  which  they 
have  organised  and  agitated  and  even  have  allowed  them- 


DEVELOPMENT  OF  THE  HOME  LAND       315 

selves  to  be  seduced  by  the  will-o'-the-wisp  promises  of 
"leaders,"  some  sincere  and  some  merely  unscrupulous. 

Health,  joy,  energy  and  patriotic  ardor  must,  as  a  re- 
sult of  this  plan,  be  stimulated  and  vitalised  in  the  whole 
people.  The  war  tended  to  bring  all  the  people  together, 
to  allay  bickerings  and  suspicions,  to  make  them  feel 
more  vigorous  and  forceful  and  more  ready  to  make 
mutual  concessions  and  live  and  let  live.  Yet  a  war  aim 
as  a  stimulus  would  not  be  comparable  with  this  peace 
aim  in  calling  forth  ambition  and  energy  and  in  promot- 
ing good  fellowship  and  co-operation,  and  these  of  course 
are  at  the  basis  of  all  the  development  and  progress  we 
can  hope  for.  Bolshevism,  the  spirit  of  dissension, 
hatred  and  destruction,  would  not  dare  raise  its  head. 

The  Union,  its  Government  and  Administration, 
through  this  movement  would  be  exalted  to  a  degree  to 
which  no  state  in  all  history  has  ever  attained,  for  its 
foundations  would  be  the  willing  co-operation,  the  unity 
and  the  happiness  of  a  whole  people,  in  the  highest  grade 
of  civilisation  and  of  expertness  in  the  development  and 
manipulation  of  the  means  of  progress,  and  Hving  in  a 
land  of  unrivalled  resources. 

Proper  handling  of  this  scheme  will  make  of  Ameri- 
cans the  scientific  market-makers  of  the  world.  They 
will  have  become  the  professional  business  creators. 
No  reason  will  there  be  for  the  scope  of  their  efforts 
being  limited  to  their  own  country.  They  will  be  able 
to  use  them  also  in  other  lands,  for  their  own  benefit 
and,  even  better  still,  for  the  betterment  of  the  whole 
human  race.  One  hesitates  at  sweeping  general  phrases, 
and  yet  so  it  actually  is;  the  way  is  here  plain  for  Hft- 
ing  up  and  ennobling  our  common  humanity. 


CHAPTER  II 


PROMPT  ACTION   NEEDED 


Conditions  Now  Ripe  For  New  Great  Undertaking — 
American  Industries  Are  Pausing  before  Fresh  Start 
— Home  Trade  Versus  Foreign  Trade — Financing 
Needed  in  Either  Case — Machinery  Manufacturers 
Preparing  Campaign — The  Most  Desirable  Purpose  in 
Planning  Public  Works. 

The  difficulties  that  confront  us  in  planning  to  de- 
velop the  resources  of  foreign  countries  in  order  to 
create  for  ourselves  a  great  and  permanently  reliable 
outlet  abroad  for  our  industrial  production  do  not  pre- 
sent themselves  when  we  consider  the  development  of 
our  resources  and  trade  opportunities  at  home.  The 
question  of  financing,  when  applied  to  our  own  country, 
ceases  to  be  a  problem.  The  long  delays  of  investiga- 
tion of  conditions,  resources  and  opportunities  and  of 
education  for  the  new  prospective  trade  abroad  are  not 
needed. 

At  home  we  already  have  the  initial  development  in 
all  its  various  forms,  a  development  of  vast  magnitude; 
our  problem  is  merely  one  of  elastic  expansion,  normal 
and  methodical.  The  opportunities  that  here  offer  them- 
selves are,  in  view  of  all  the  circumstances,  unparalleled 
anywhere  on  earth.  With  the  whole  people  working  as 
a  unit  this  expansion  would  be  instantaneous;  no  wait- 
ing for  something  to  turn  up  in  a  country  out  of  sight 

316 


PROMPT  ACTION  NEEDED  317 

and  out  of  reach.  Human  progress  normally  is  slow. 
War  speeds  it  tip.  If  we  mobilise  all  efforts  for  it  as 
we  did  in  war  time,  we  can  make  it  advance  by  leaps 
and  bounds.  Capital  and  labor  questions  could  be  set- 
tled in  a  new  and  more  satisfactory  manner  and  the  bet- 
ter day  for  all  would  surely  come. 

Nor  is  this  an  adventure  into  the  realm  of  pure  imag- 
ination. A  phrase  uttered  by  President  Wilson  in  the 
Italian  Chamber  of  Deputies  is  apposite.  "What  men 
once  considered  theoretical  and  idealistic,"  he  said,  "turns 
out  to  be  practical  and  necessary."  So  far  is  this  pro- 
posal from  being  merely  idealistic  that  it  is  advanced 
as  an  urgently  necessary  means  of  saving  a  serious  sit- 
uation. 

Every  foreign  country  of  importance  is  going  to  work 
out  for  itself  the  greatest  possible  measure  of  self-suf- 
ficiency. The  manufacturers  in  other  lands  have  come 
around  to  the  American  poHcy  of  big  quantity  produc- 
tion. The  war  forced  it  on  them.  America  does  not 
need  to  strive  for  self-sufficiency.  What  she  may  rightly 
strive  for  is  the  very  fullest  form  of  self -development 
and  self -embellishment. 

Normally  there  is  a  certain  natural  repugnance  to 
taking  up  any  great  enterprise  whose  form  is  more  or 
less  undefined  and  in  which  one's  own  interest  is  not  spe- 
cifically manifest.  There  is  a  lethargy  to  shake  off,  an 
inward  revulsion  to  overcome.  The  country  was  under 
the  oppression  of  this  inertia  in  the  period  before  it  en- 
tered the  war.  War  shook  it  free  from  the  lethargy. 
The  heart  of  the  whole  nation  is  now  beating  faster.  No 
task  would  be  too  great  for  it. 

If  action  is  to  be  taken  on  this  great  plan,  it  should  be 
taken  without  delay.     Nature  tends  to  reassert  itself; 


318  AMERICA  IN  WORLD  MARKETS 

enthusiasm  wanes  when  pressure  is  relaxed ;  peoples  after 
a  period  of  exaltation  subside  gradually  into  the  old 
routine.  If  the  chance  is  allowed  to  slip,  it  will  be  more 
difficult  to  start  up  again.  The  money  and  resources 
which  we  have  in  such  tremendous  abundance  may  be 
dissipated  in  other  and  unfruitful  ways.  It  is  flouting 
Providence  not  to  profit  by  it  for  the  one  most  worthy 
purpose  to  which  men  can  apply  themselves,  the  elevating 
of  their  kind.  What  excuse  for  our  age  and  its  civili- 
sation if  it  neglect  this  unique  opportunity  to  take  a  giant 
stride  in  advance? 

Decision,  if  it  is  coming,  should  come  soon.  Industries 
that  could  participate  are  in  the  state  of  pause,  undecided 
about  the  fresh  start  to  make.  This  is  the  opportune 
moment  to  point  the  new  road  to  them. 

It  is  not  the  case  of  one  or  more  great  concerns  show- 
ing vision  and  discernment  and  starting  off  on  the  right 
path.  The  vital  interests  of  the  nation  are  concerned 
in  the  whole  industrial  forces  of  the  country  choosing 
the  right  way  from  the  cross-roads  we  have  now  reached. 

American  industry  is  on  the  eve  of  an  important 
change-over  in  the  matter  of  machinery.  It  is  obvious 
that  the  principal  uses  to  which  American  machinery  is 
to  be  devoted  should  be  known  well  in  advance,  so  that 
machinery  manufacturers  may  be  guided  in  their  plans. 
Like  everything  else,  machinery  is  made  in  a  particular 
way  in  view  of  its  special  market. 

While  machinery  manufacturers  were  engaged  in 
turning  out  highly  specialised  and  simplified  machines 
for  war  work,  they  had  not  the  opportunity  to  bring 
out  all  the  new  and  perfected  types  of  machines  which 
the  evolution  of  their  industry  made  feasible.  The  war 
for  them  has  been  a  marvellous  efficiency  teacher.    While 


PROMPT  ACTION  NEEDED  319 

in  general  they  were  working  on  old-form  products,  they 
kept  along  steadily  with  their  plans  for  new  and  per- 
fected machinery.  The  unification  of  the  country's  effort 
and  the  free  intercommunication  between  our  manufac- 
turers and  those  of  the  Allies,  made  it  possible  to  dis- 
cern weak  points  and  good  points  in  machinery  construc- 
tion and  to  design  machinery  with  the  special  aim  of 
making  it  available  for  all  kinds  of  workers,  even  per- 
sons lacking  in  physical  strength,  such  as  women  and 
crippled  or  otherwise  debilitated  men.  All  the  machin- 
ery manufacturers  have  this  great  body  of  acquired 
knowledge  at  their  disposal.  They  are  now  almost  ready 
for  decision  as  to  their  future  plans.  Unquestionably 
they  would  rejoice  to  follow  the  patriotic  instinct  and 
throw  the  great  weight  of  their  influence  for  home  de- 
velopment, if  only  the  vista  were  made  clear  to  them. 

War  experiences  have  had  an  amazingly  broadening 
effect  on  our  whole  industrial  methods.  Those  four 
years  spent  in  producing  products  that  were  blown  into 
shreds  on  the  battlefield  did  not  represent  four  years 
lost  for  scientific  and  industrial  progress  as  the  pacifist 
brethren  would  have  it.  Instead  of  losing  four  years 
we  have  gained  a  net  advancement  in  the  art  and  science 
of  industrial  production  of  at  least  ten  years. 

How  favorable  is  the  hour  for  putting  into  reality 
what  must  have  been  the  vision  of  every  true  patriot, 
the  aspiration  to  make  the  United  States  overwhelmingly 
powerful,'  to  make  America  beautiful. 

Every  industry,  every  line  of  business  in  the  country 
is  interested  in  an  early  decision.  The  governing  au- 
thorities, national,  State  and  local,  who  are  meditating 
public  works  to  provide  labor  for  the  unemployed  would 
also  be  supplied  with  a  most  desirable  guidance.     The 


320         AMERICA  IN  WORLD  MARKETS 

whole  people  while  the  exuberance  of  vigor  called  up 
by  the  war  is  still  strong  in  them  are  in  the  best  condi- 
tion for  being  summoned  to  a  new  mighty  effort. 

And  with  this  great  task  undertaken  and  carried  on 
by  a  united  people  animated  by  an  enduring  energy  and 
enthusiasm,  the  future  historian  might  well  quote,  in  a 
new  interpretation,  Bishop  Berkeley's  graceful  prophecy, 
in  a  great  compliment  to  America: 

"Westward  the  course  of  empire  takes  its  way; 

The  first  four  acts  already  past, 
A  fifth  shall  close  the  drama  with  the  day: 
Time's  noblest  offspring  is  its  last." 


THE  LIBRARY 
UNIVERSITY  OF  CALIFORNIA 

Santa  Barbara 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW. 


Series  9482 


3  1205  00519  9821 

PL- 


SOUTHERN  REGIONAL  LIBRARY  ^^^^^^ 


AA    000  499  399    4 


